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Rental Owners are Golden

Rental Property Forecast
Zillow projects home values will increase by 3.6 percent in 2017 and 2.97 percent in 2018. Analysts foresee many millennials packing their bags and moving away from their parent's homes in 2017. This is expected to create more demand for rentals in 2017.

Presently, Zillow reports the cost of rental property in major metro areas . can cost about 40 percent of the tenant's income. Millennials are expected to significantly impact demand for housing and rental units. More millennials will also start living independently and increase demand for rental property. New rental occupancy rates will still be affected by population growth, which accounts for 50 percent of demand. Adult children moving from their parent's basements and high divorce rates will also contribute to the number of singles looking for rental units.

With 80 million millennials considering their housing choices, they will drive rentals. The bottom line is that as our millennials get on their financial feet, housing and rental marketplaces will see increased demand which means prices and values will rise!

Zillow estimates that, on average, rates for rental properties will increase. Rising rent prices may be less than welcome news for renters, but the opposite is true for investors who are buying rental properties. Real estate can be an effective way to hedge against market volatility and generate an additional income stream. Looking ahead, the rental market certainly appears inviting from an investor's perspective.

Fix and Flips

The trend of buying a fixer-upper, making some repairs and "flipping" to a new buyer quickly is making a return to real estate markets. More flips are value-added improvements that investors are making to the house, rather than speculative flips which is basically someone buying and sitting on a home waiting for the prices to rise.

But like the mid 2000's, home prices are rising. Price increases in 2016 were the quickest in about 3 to 4 years which gives flippers a potential layer of protection. If the flip doesn't go according to plan, they at least made a little bit up in price gains in equity in the house.
According to Morgan Stanley, long-term housing demand will be consistent, driven by Millennials, who will be the majority of consumers who will buy a house. This is an opportunity for fix and flippers.

Given the tight supply of housing, millennials will need to consider older properties that could use some improvement. Across the United States, there are opportunities to rehab housing with good Return on Investment (ROI). It's predicted that Millennials will make up 33% of home buyers this year plus Baby Boomers will be buying homes. Truilia's house flipping study saw that flipping is on the rise nationally. 6.1% of home sales in 2016 were from flips, compared to 5.3% in 2015.

The data suggests that this could be a great year for the fix and flip market. Fix and flippers will work through the aging inventory and add value to property. The growth of the fix and flip market will continue to be fueled by the demand for housing.

Venture Associates can assist in establishing the LLC and fund structure via its consulting and writing of the private placement memorandums.

Jim Arkebauer
Reg D Private Placements