Information Age Opportunities Expand Rental Market

Mortgage

The information age hasn’t just brought us a lot more information, it has also allowed us to share information with others better. This is now allowing the rental market to expand.

While it is clearly to the advantage of people to own their own homes instead of renting, the fact remains that many people either cannot afford to own or choose not to, and this adds up to about a third of the population in fact.

Due to several factors, home ownership is on the decline. In the United States for instance, the percentage of people who own their own homes dropped from 67% in 2009 to 64% today. This might not seem like that big of a change, but 3% of the U.S. population is a pretty big number indeed.

There are about 125 million households in the U.S., so 3% of that would be 3.75 million more, bringing the total market size for renters in the country to 45 million households.

We are also seeing the number of households also trend up, from things like more relationship breakdowns, to more people choosing to live alone, to the housing market being unaffordable to many people, from not only the cost of buying but the upkeep and interest on borrowing.

All this adds up to an expanding renter’s market, and one that real estate sales does not address directly. Rather, this gets taken care of indirectly, when people purchase real estate, build it, or repurpose it to allow it to be rented our leased out to those who have a need to do so.

Reasons Behind the Growing Renting Segment

There are several barriers to home ownership that have many people on the outside looking in. We do need to borrow large sums of money to buy our own homes, and this requires sufficient credit, among other things, to obtain.

This can affect you whether you are looking to buy or rent, as there are landlords who also refuse to rent to people with poor credit, and credit checks are often done with prospective renters, and those whose scores are too low may be denied. The market being what it is though, these folks do have access to rental opportunities generally, with the difference being they may not be able to rent the place they want.

Coming up with a large enough down payment to qualify for the purchase is another obstacle for many, and like with one’s credit score, this all takes time to fix, years actually. We aren’t very good at saving as a society and there are a lot of people who are just terrible at this, a big proportion of people actually.

Without enough of a down payment, getting a mortgage is out, and it can take people a long time to save up enough for this. This is not just a matter of setting a few dollars aside for a year like you would save up for lesser expenses, and instead requires a longer-term commitment and a significant one at that.

The real estate market is not one that can adapt to changes in demand all that quickly, and it takes not only commitment but time to see additional units built. Builders prefer the quick buck that a real estate sale provides over the longer revenue streams that renting out delivers, and this all leaves the renters market, by many accounts, served less efficiently than would be desirable.

Rising interest rates are also serving to expand the renters’ market, causing less people to be able to afford or even qualify for a mortgage, since these rising rates are used to determine whether we can afford the mortgage or not.

This can serve to limit the price we can spend on a home, and we could just look for a cheaper place, but rising home costs can get us in a position where no suitable place can be afforded.

Opportunities to Invest in Rental Properties are Expanding

For those who are considering getting into this business or expanding their current businesses, the opportunities here are therefore growing. Companies invest in such things, but what sets this market apart from most others is that ordinary folks can enter the market fairly easily as well, starting out with as little as one unit which they buy and rent out.

Since they can just borrow the money, the only real requirement here is to be able to come up with the money to put down on these rental properties, provided they have enough capacity on their own to keep things afloat should they have trouble keeping their units occupied.

Modern-day technologies are helping people get in on all of this though when they would not be able to otherwise, and the technological solution now being used is what we call crowdsourcing.

People are entering into agreements with others to partner in purchasing rental properties, and the internet is therefore allowing people to be brought together in business in a way that would not have been possible without this channel.

We do need something to pick up the slack between the number of units that the market has to offer people and the demand for it, and we should not really want this inefficiency to be expressed in the higher rent that this overweight demand causes.

Expanding this market this way is to the benefit of everyone, landlords, renters, the construction business, and the economy as a whole. This is a great way to leverage the information age to better bring people together and allow more opportunities to be realized.

Another new innovation that is allowing for more market efficiency and also allowing everyday people to get in on the action is the digitally accessed short term rental market, served by sites such as Airbnb. People can now rent out their places this way, including renting out places they also rent.

Since owners make the rules, and can allow or disallow such opportunities to their tenants, there are opportunities for them to monetize this for themselves as well. We are already seeing “landlord approved” as a feature of some of these rentals, and aside from approving them, landlords can also charge for this, where the profits of the venture are shared with them in exchange for their allowing it.

While we put so much focus on home ownership, we cannot forget those who do not own, and this is a huge market with a lot of demand that can be a challenge at times to properly satisfy. Using the power of the internet to both expand the market and allow for more efficient use of these properties, to the benefit of all parties involved, is a welcome addition indeed to the property rental scene.