We all know the rule of supply and demand and it applies to the real estate market also. For serious investors looking to capitalize on the market, the following insights from FHFA (housing finance agency) should be of utmost interest to you.
- Rental vacancies are falling.
- The rental market is tightening up.
- Expect higher rents and thus higher inflation in the near future.
- 2 million “missing households” (due to population growth and people currently living together to save $$ – as economy corrects these 2 million households will seek their own homes).
- Single family and multifamily completions are set to tie record lows for 2011.
- There is no supply coming on line to absorb it.
- Rental vacancies are falling. (I KNOW I said that twice, it was worth repeating!)
This is the story that is shaping up for 2012. This is a perfect storm for the investors. High demand for rents and low vacancies mean strong and solid returns. Clearly a perfect exit strategy with high demand for housing, the investors have plenty of renters to choose from which creates a great opportunity to get great tenants and maintain very low vacancy levels. Of course the low vacancy levels create stronger cash flows. These strong cash flows can be enjoyed for a number of years until the economy corrects. Once the economy strengthens the and lending standards loosen up there will be plenty of buyers to capitalize on to create a strong selling position for those who wish to cash on a great Value play.
To qualify to be a great investment: a property needs have the strong position for Cash flow. Today’s high demand for rental units definitely creates that strong cash flow position.
To create a great value play: A property needs to have Capitol Growth or the ability to create an improvement to the property to increase its value. Today’s market is perfectly positioned to create both.
To Create the Best investment: A property MUST be located in an area that can sustain the cash flow and sustain the growth for the longest period of time. This is where most people leave money on the table. Today it is possible to find cash flowing property anywhere and many are blinded by the potential or loss of potential opportunity because of this. If a property cash flows, this is great. You may want to consider all your goals and objectives. If you also wish to have a value paly you want to ensure you are investing in a strong and solid investment location.
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