The Single-Family Rental Market Continues Expanding: Here's How You Can Participate

Large institutional investors on Wall Street have lined their pockets with profit stemming in part from investments in single-family rental portfolios; oftentimes with returns exceeding those found in the stock market. Small investors are starting to catch on, grasping the opportunities available to them through real estate investments. Whether it’s buy-and-hold investing or flipping properties, there is serious money to be made in the $29 trillion* residential investment real estate industry. In 2016, 37% of all real estate sold in the U.S. was purchased for investment purposes.*

According to a recent RealtyShares study, more and more people are interested in real estate as an investment. Interestingly, 50% of those interested fall into the millennial demographic. Age 18-24, millennials are the next wave of investors and they prefer real estate to the stock market and other investment options. Since 2000, nationally, real estate has generally outperformed the stock market at a 2-to-1 return ratio. But while the population is beginning to recognize real estate as a strong investment, 83% of millennials think it’s too complicated and too expensive to make a reality.

Investment platforms and service providers in the single-family residential investment sector have an opportunity to capture more of this audience by making it easier to invest in real estate. Many people are unaware of options like crowdfunding, buying with retirement funds or house hacking, which includes buying an owner-occupied multiplex and using the rental income from the remaining units to cover the mortgage and maybe even generating extra passive income. Moreover, by living in the property, investors may qualify for more favorable loans.

Crowdfunding is another alternative investment method gaining traction. Sites like RealtyShares, Patch of Land and Fundrise have sprung up making it easier for investors to pool their funds into a larger investment. While Patch of Land and RealtyShares are currently only available to accredited investors, Fundrise is available to anyone over the age of 18. These options make it easier to participate in real estate investing without being the sole investor, flipper or landlord. They offer potentially reduced risks and boosted returns to each contributing investor.

But as a new investor, how do you choose the best method? As with anything, new investors tend to be skittish. They don’t want to make costly mistakes and investing in real estate can be extremely intimidating. The Real Estate Crowdfunding Review, built by investor and serial entrepreneur, Ian Ippolito, is a great resource for those ready to take the first step but are unsure of what direction to head. The site features unbiased reviews, offering pros and cons on a bevy of online investment resources. It also includes helpful investing tutorials to new investors seeking additional education.

*Sources:
RealtyShares
Seeking Alpha

BlogBrittany Nelson