101: The Ugly Truth: We Are Becoming A Renter Nation
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“There is nothing permanent except change” – wise words from ancient Greek philosopher Heraclitus. Unless you’ve been living under a rock, you know that our country is undergoing some pretty major changes. One of those areas is housing and the housing market… 🤓🤓
The United States is becoming a nation of renters. No matter how you feel about it, it’s happening, so we must adapt. One thing we can be certain of, the demand for apartments will continue to grow by leaps and bounds.
The questions to ask yourselves are: are you getting yourself in front of this booming demand for housing? Have you positioned yourself to profit from the growing rental nation? You may be surprised who else is joining the frail to profit from this long-term trend. 🤔🤔
Let’s get into it ⏬
Did you know that Nevada, the gambling mecca of the world, collected an all-time record of gambling revenue in 2021? Even with COVID, inflation, recession, and the plethora of other things going on in the world, the state collected over $13.4 billion in gambling revenue.
How is this possible?
Have you heard of the phrase, “the house always wins”? This means that in the long run, the rules of the game are such that the casino will always profit while the gamblers will lose money. They have built-in advantages embedded into the game. Hey, someone has to pay to keep the neon lights on right? 😊😊
Now, this isn’t a time to start crying about how this is unfair, instead, let’s see how we can benefit from playing the investing game with a built-in edge to our business. That’s the same thing we are doing with our apartment investing business, we have the built in edge i.e., a growing nation of renters.
Part of the way to set up yourself for investing success is to understand the underlying assumptions that are impacting your investment asset class. For apartment investing, fundamentally, it is the demand for rental housing. We can all agree that if one day, everyone stops renting apartments the industry will obsolete.
We can stake our foot in the sand and tell you right now that there is no possible way that housing rental demands will decrease in the US and we’ll play out two extreme scenarios, one in which we fall into a deep recession and the other one where it’s just a blip in the radar. 🤓🤓
According to a research paper published by the Urban Institute, “the homeownership rate will continue to drop for most age groups through 2040. The pace of renter growth will be more than double the pace of homeownership growth from 2020 to 2040. No matter how you feel about it, it’s happening. The rental market is growing and we are becoming a nation of renters.”
We will link the article in the show notes, because there are some pretty interesting statistics in there, but one of the ones we found most shocking is that over the course of the next 20 or so years, renter growth will outpace homeowner growth by nearly double. There are a number of reasons for this that we won’t get into here, but the research findings are pretty stunning.
Don’t believe us? 😨
Let’s look at some data. 👇
According to Axios Markets, the US is currently experiencing 40 year-high inflation and skyrocketing interest rates. As if that’s not bad enough, interest rates and even monthly principal has increased 44% from just the start of the year.
“Surging home prices and mortgage rates cut housing affordability by 29% over the last year, as measured by the National Association of Realtors.” And home prices have never been higher.
Obviously, this isn’t great news if you’re looking to buy a home. In fact, the median price of homes in the US has risen by more than $100,000 from Q2 of 2020 to Q1 of 2022. This rise is by far outpaced income and inflation. According to CNN, “despite rising mortgage rates that dampened sales, home prices continued to climb higher in the second quarter, with many more cities seeing double-digit price gains…”
Even worse, first time homebuyers are spending almost 40% of their household income on their mortgage payments. We don’t know about you, but that’s a position we never want to be in.
All this outrageous pricing surge is doing is causing a supply crunch for apartment communities, due in part to a lack of building during the most recent recession in 2008. The problem is even worse in large metropolitan areas; the National Multifamily Housing Council predicts “a pressing need to build 4.3 million new apartments by 2035”.
What this means ☝️ is that it will be harder and harder for the average American to buy a home, making their reality as lifelong renters become more concrete. So we know this is all really bleak, but we promised. There is some light at the end of the tunnel, and the great news is that you CAN be on the RIGHT side of this transition.
The thing you need to think about is how you can position yourself differently than everybody else. Right now there are a lot of people who are afraid, they are retracting, they are freezing, they are not investing – that’s when you seize the moment to dominate the marketplace. This is when you need to go all in! ✨
We the Kitti Sisters are all in and a bag of chips in the right markets
Please notice we said the right markets; we aren’t telling you that every investment is going to be a good one, and, like always, please please please consult your trusted professional team before you go making any life altering decisions.
But we love markets that are considered hidden gems 💎, that may not be widely known by the less savvy investors. Markets such as Rogers, Arkansas, Tucson, Arizona, and Greenville, and North Carolina, just to name a few. In these metros, the growth has been heavily driven by growth in business and population coming to the area.
The Rogers, Arkansas metro area has experienced the highest cumulative job growth. Strong job growth typically push wages up further which will further boost housing demand in the area.
And guess what Cashflow Multipliers, we think bigger, more strategic… 💪 don’t we? We don’t think like the rest of the mom-and-pop investors, the dabblers, right? No, we think like the big boys.
In fact, Blackstone, one of the largest private equity firms, is close to finalizing what could be the biggest traditional private-equity real estate investment fund in history, according to the Wall Street Journal. We don’t know about you guys, but when the smart people at Blackstone start making big moves so they can scoop up the best deal, we pay attention!
We are doing what the institutional investors are doing, see the underlying growth and demand, and we go all in! Because like Blackstone when we get into the game, we know that the house always wins. 😉🙌
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