It’s hard to predict what will happen with the rental market in the year ahead. We’ve seen the Covid-19 pandemic spark many changes in the past couple of years, especially within real estate. So, what can investors expect this year? Keep reading as we discuss the 2022 rental market projections and how investors can prepare.
Rental Market Outlook for 2022
We’ve witnessed a massive decline in home prices within the last year. However, many Americans took advantage of the buyer’s market and purchased new homes. This resulted in an undeniable supply and demand problem.
As so many people were purchasing homes, there wasn’t enough supply on the market to keep up. As a result, homes were quickly bought and taken off the market within days. Unfortunately, since the demand stayed high and the supply dropped, the prices of homes skyrocketed early on in 2021.
Starting this year, the market will likely begin to balance out more. However, homebuyers should still pay close attention to the market. Prices throughout this year may remain high, which could cause some people to avoid purchasing homes.
If you own a rental business and were hoping to purchase real estate in 2022, don’t get intimidated quite yet. Although the mortgage rates now are higher than usual, we’ll provide you with some investment strategies to help you prepare and smoothly navigate the purchase process.
2022 Rental Market Projections
As most people know, the pandemic created an enormous amount of changes in real estate. As mentioned before, tons of people were purchasing homes while prices were low. In fact, the number of homes sold during this time surpassed the astonishing sales in 2007.
Other changes, like low mortgage rates and a dramatic increase in demand, also caused changes to the market. So, what will 2022 bring us? First, let’s take a look at some trends that may happen over the next year.
- Increased Home Inventory
- Homes Will Sell Fast
- Investors Will See Large Returns
- Rent Will Continue Rising
- Suburban Areas Create High Demand
Increased Home Inventory
We saw a massive increase in demand throughout 2021. In fact, there was so much demand from homebuyers that the real estate supply couldn’t keep up. Luckily, this year, the inventory should make a comeback. This is good for investors who could not participate in the competitive rental market last year.
Homes Will Sell Fast
Once more real estate is added to the housing market, it’s bound to sell quickly. Considering the high demand throughout 2021, it’s no surprise that people are still looking to purchase real estate. So, if you are an investor looking to expand your rental business with more homes, remember to act quickly yet thoroughly for the best offers in a competitive market.
Investors Will See Large Returns
Those lucky enough to purchase real estate while the market was low are bound to see significant returns this year. Although home prices are set to rise this year, investors who bought homes early on are in a great position to see significant returns.
Rent Will Continue Rising
It’s no surprise that prices in almost everything are rising due to inflation. As such, rental rates are no different. While this is unfortunate for renters, it’s excellent for rental business owners. So, although the prices of homes are pretty high, the demand for rentals and the high yields will keep investors hopeful.
Suburban Areas Create High Demand
When the pandemic hit and the stay-at-home orders were placed, many people transitioned to a work-from-home environment. That said, the demand in suburban areas increased dramatically. Despite urban areas being more fast-paced, many people no longer need to be close to work since many prefer the ease of working at home.
What Makes a Competitive Rental Market?
Before purchasing real estate, whether it’s your first rental home or your tenth, it’s essential to do some research. That said, you’ll want to know what the real estate market conditions are and how you should proceed with your purchase. As of right now, the market is pretty competitive. But, what makes a competitive rental market in the first place? So let’s discuss a few factors.
- Not Many Homes on the Market – One of the more apparent signs of a competitive rental market is the number of homes for sale. If there are not many homes on the market, investors have more competition with other buyers.
- Sales Happen Fast – Another immediate sign of a competitive market is quick sales. If you’re trying to purchase real estate in a competitive market, you won’t want to wait.
- Offers From Multiple Investors – Real estate investors should realize that, in a competitive market, there will be multiple offers per home. While this is great for sellers, it can be a nightmare for buyers.
- Cash Offers – Another great sign of a competitive market is cash offers. After all, “Cash is King,” so a lot of sellers find this payment method enticing. However, investors should know that purchasing a home with financing doesn’t necessarily lower their chances of securing the property.
- High Market Prices – Finally, high sales prices are another indicator of a competitive rental market. If you notice homes priced at or above market value, you know that there’s competition amongst buyers.
How Can Investors Prepare This Year?
The ultimate key to securing a rental property at the right time is paying attention to market trends and using innovative strategies. So, how can investors prepare for this year’s housing market? First, let’s go over some rental investment strategies to follow while considering a real estate purchase.
- Evaluate Your Finances
- Explore BRRRR Investing
- Buy When You’re Ready
Evaluate Your Finances
Before making a real estate investment, the first step to take is evaluating your finances. After all, before you can make a large purchase, you must have a solid understanding of what you can afford and how much you should save up. If you go into a purchase without a good understanding of what money you have available, you could quickly run into financing issues.
Explore BRRRR Investing
The BRRRR investment method, which stands for Buy, Remodel, Rent, Refinance, Repeat, is an excellent way for investors to build a solid rental portfolio while earning income at the same time. This method allows investors to quickly purchase real estate, add value by remodeling, earn income while renting, then refinance and start over.
Buy When You’re Ready
If you’re not ready to make a property purchase yet, then wait. Don’t allow anyone to pressure you into an investment that you’re not prepared for yet. If you wait until you have a solid investment plan, you’ll have time to evaluate your finances and make the right purchase for you.
Hire a Reputable Property Management Team
Working with a property management team can benefit investors in many ways. For example, the Bay Property Management Group professionals can help you run your rental business from start to finish. We offer full-leasing services starting with tenant screening, rent collection, monthly financial reports, and much more.
So, whether you’re looking to purchase your first rental property or your hundredth, consider hiring Bay Property Management Group for all your management wants and needs. We’re here to make things easier for you in a competitive rental market. We offer full-service property management in Washington DC, Baltimore, Philadelphia, Northern Virginia, and surrounding counties.