Investor Intel: Investing for Income
The post-Brexit hangover is still lingering and U.S. stocks have been on a wild ride this summer, mostly due to fluctuating oil prices. One thing that doesn’t seem to be rattling the market – yet – is an increasingly heated U.S. presidential campaign. The market opened up today though, due to a very positive jobs number. The Bureau of Labor Statistics reported that nonfarm payrolls rose by a seasonally adjusted 255,000 in July. Revisions showed U.S. employers added 18,000 more jobs in May and June than previously estimated. The unemployment rate was unchanged at 4.9 percent. These positive jobs reports could put an interest rate hike back on the table in September.
Given the rollercoaster, it’s no surprise that investors are seeking safe havens for their funds. One asset class that has seen significant interest lately is, you guessed it, rental property.
A Bloomberg News story this week highlights the rise of landlord nation through the perspective of Florida investors Pete and Julie Pollinger. The couple hopes to build a portfolio of 10 properties on Florida’s Space Coast.
The Pollingers are not alone. Small investors have flooded the asset class, and according to Bloomberg, “The share of single-family homes used as rental properties, meanwhile, has surged to a 30-year high, according to a Zillow analysis of data from the U.S. census. Separate data provided by RealtyTrac show that only 65 percent of homes purchased in 2015 are owner-occupied.”
A recent Wall Street Journal article supports this storyline. While the U.S. homeownership rate declined to its lowest level in 50 years, the bigger picture shows that household formation is up – with renters replacing buyers as the heads of these new households.
There’s an additional bright spot too: “A rising number of households suggests more people are optimistic enough to strike out on their own and helps further spur growth as they buy furniture, start families and move up the economic ladder.”
Becoming a landlord certainly has its advantages beyond building equity and achieving tax advantages through real estate ownership. It offers the stability of (mostly) consistent rental income, access to new forms of financing and property management software that was once reserved for large institutions.
As existing investors know, landlording is not without its headaches, but economic indicators suggest the benefits could outweigh the drawbacks!
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