Admittedly it was better buying rental houses in 2012, but I don’t have a time machine and prices have gone up since then. However, with recent swings in stock prices, it’s good to remember the wisdom in diversifying our investment portfolios.
Some of the reasons we got such great deals 3 years ago are still applicable today:
- The rate of homeownership is still very low compared to historic norms.
- House price increases and more stringent mortgage underwriting guidelines are making homeownership unattainable again for many tenants.
- As more people move to the Metro Atlanta area, and as household formations are catching up from lower than normal rates over the last several years, rents are going up for residential landlords. Simple supply and demand demonstration. The rental housing supply in Atlanta is struggling to keep up with demand. Rents are increasing rapidly as a result.
RealtyTrac, a real estate information company, recently named Atlanta to be one of the best U.S. rental markets because of the estimated 26% potential return (Clayton County values) it estimates property owners can get there. https://rtracdev.wpengine.com/blog/first-quarter-2015-residential-rental-market-report/
Bearing in mind that high returns are associated with high risks, we are helping some more conservative investors buy houses that will generate unlevered IRRs in the 7 – 10% range with levered IRRs in the 15 – 25% range. I prefer to limit debt to 70 – 80% of the purchase price. We get rich more slowly while keeping our investment dollars safer.
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