In the context of economic shifts, the best defense that investors could do to keep their assets safe is to diversify their investment portfolio across nations. Rental real estate in the US is one of those wise investments. 

FIRST OF ALL, WHY IS US REAL ESTATE? 

We all know not to put all our eggs in one basket when it comes to investments. But which baskets should we put them? That’s where the question of the US real estate market comes in – is it a sturdy basket for our financial future? 

To respond to the question, in addition to profitability indicators, there are three extra “basket essentials” that matter and make the US real estate market an attractive global investment: liquidity – you can easily sell your properties, transparency – the market is well-regulated, and stability – it stays strong during financial storms. 

Liquidity comes first. Owning US real estate is not restricted to global citizens. Anyone can buy and sell a home with the same rights as Americans, making it popular with global investors.

Transparency comes second. Buying property in the US is not a guessing game because the US real estate industry is a well-lit supermarket. Equal access to information and the rules are displayed transparently, making it a comfortable place for investors to shop. You can even check house records online, even for those next doors while enjoying breakfast in a swimming pool.

At the same time, a professional title company is in charge as a third party and mainly involved in the paperwork for the property purchase and registration process, guaranteeing benefits for buyers and sellers. The best part of this process is all information is made digital and well documented on the Federal system where you can just check it in a couple of minutes. 

And stability comes last. Compared to the roller coaster of the stock market, investing in US real estate offers steady growth and less volatility. Additionally, the US government actively assists real estate growth. Organizations like Fannie Mae and Freddie Mac offer loan guarantees and market support packages, making it a safer bet.

Borrowing your US property also offers a hidden bonus: lower taxes. The loan interest reduces your taxable income, leaving you with more money in your pocket. With slow price growth (normally 5-10% per year), rent income, and a strong USD, owning a US property can net investors up to 20% yearly profit, which is perfect for cautious investors who prioritize safety and consistent returns. 

Thus, it makes sense to consider the US real estate market to be among the most lucrative. The next question should be: with the current dip of the world economy, which type of property has the biggest potential of prospering? Real estate for rent can be the one.  

WHAT IS REAL ESTATE FOR RENT?  

Any real estate asset owned by an individual or organization and rented to tenants for a fee is called real estate for rent. Office buildings, retail businesses, and industrial spaces are examples of real estate that can be rented out on a commercial and residential basis. Property classified as residential includes homes, apartments, and condos. Rent payments from tenants are the main source of revenue for owners of rental properties. There are two categories of real estate rental businesses: 

• Ownership-lease model: the investor directly leases to third parties all or a part of the real estate they own. 
• Rent-lease model: an investor subleases a home or apartment at a higher price to “pocket” the price difference after renting it out from the original owner. 

HOW THE RENTAL MARKET THESE YEARS LOOKS LIKE? 

The US rental market is surprisingly stable with a decent increase in the supply of renters, even though mortgage costs and interest rates are still rising to their highest points since the 2000s. 

Danielle Hale, chief economist at Realtor, claims that rental housing prices often rise over time. However, rent is now fixed, which is different from owning a house where mortgage payments are determined by the interest rate the owner agreed upon when buying the property.  

She also noticed renters tend to initially go for affordable locations like Birmingham, Alabama or Richmond, Virginia. However, they then returned to “redder” areas that are pricier but with better facilities such as Boston, Massachusetts and Washington, D.C.  

This shows investing in rental property is not the same. Investors used to snap up cheap homes anywhere, but renters are now pickier. They come prepared and they have their own “taste”. They want modern buildings with amenities, convenience and unique style, even if they are charged more. Old and unfurnished options are starting to be left behind.  

WHY RENTAL REAL ESTATE IS A TOP LONG-TERM INVESTMENT? 

Building a successful rental real estate strategy starts with a solid foundation of knowledge about its key benefits. These are the top rewards of rental property before you start crafting your investment approach. 

A recurring revenue stream. A lot has mentioned this, and it sounds like a scam. But it is (partially) true, and it is more crucial to repeat: owning a rental property means having a steady monthly cash flow that keeps rolling in even when you are not working. 

But investing in rental property has advantages beyond just rental returns. Unlike a paycheck, rental income may qualify for special tax treatment in some states, and it is suggested to partner with a tax pro can maximize your profits. Also, a key advantage of owning rental properties is the opportunity to enjoy both positive cash flow and asset appreciation in the form of increasing property value. 

There is no need for huge capital to start investing. The focus of rental real estate is not about hefty initial investment, but its accessibility. With diverse options in the market ranging from budget-friendly to luxury properties, investors can choose an investment level that fits your financial resources, all while still enjoying steady monthly returns. 

An anti-inflation weapon. Many individuals searching for a rental place often prefer stable locations to avoid frequent relocations. Once they find a well-maintained home that suits their needs, they opt to rent it for a long duration.  

Inflation based on the Zillow Observed Rent Index (ZORI) has continued to fall since mid-2021, while Consumer Price Index (CPI) rent has taken time to reflect this change. Rent prices usually rise in line with annual inflation, but this has not been the case in the last three years. Source: American Progress.  

It is worth noting that mortgage rates are increasing, and people might not be able to save up enough to purchase a property, leading them to choose renting as a temporary solution. Investors can capitalize on this trend and create a portfolio of reliable, long-term rentals that cater to the growing demand. 

Growing home values. The value of the property itself can also grow over time, like planting a money tree on your roof. This “growth” is called appreciation. An increase in a property’s worth may result in a profit for the owner when they sell it or in higher monthly rent from its renters. 

Throughout the years from 2010, home value has constantly risen. The median home price in the United States was $412,000 in September last year, as reported by Redfin. Source: Case-Shiller Home Price Index, Fred St. Louis Fed Economic Data.

Many landlords, according to The Motley Fool, rely on the rental income to cover expenses related to their properties, such as mortgage payments, property taxes, repairs, and insurance. Imagine putting down 20% on a rental property and watching it grow in value while the tenant helps cover the costs – it’s like getting free appreciation on top of your rent checks. 

WHAT KEY RULES TO TAKE NOTICE OF? 

A well-thought-out investment strategy for rental real estate can not only do wonders for your financial stability, but also slash your tax bill every year. Here are tips to make your investment journey even more rewarding. 

Prepare to crack the rental market code. Investing in rental real estate may not be suitable for everyone. To minimize risks, it is crucial for investors to have a comprehensive understanding of the rental market, including administrative and legal procedures. Investors should familiarize themselves with the challenges of property management, such as sourcing customers, marketing and advertising, negotiation, maintenance, and insurance. By having solid knowledge and an executable strategy, investors can soon move forward with their business plans. 

Location, location and location. Where the property lies can make such a huge impact on how it can be sold and eyed! Prime spots or areas on the rise can make your rental property shine. It is suggested to prioritize easy access, nearby amenities such as amusement parks, shopping malls, and hospitals. Proximity to working areas of potential customers like industrial parks, office buildings, and universities should also be considered. 

Financial leverage can be your shelter. Using financial leverage is a tactic that investors use to possibly boost their returns. Simply put, it is borrowing money to make more money. When private real estate and loan accounts use a higher amount of total investment capital, it means the investor is using large financial leverage. But like any booster, too much thrust can send investors off course. It’s best to keep a borrowing limit under 30% of your property value.  

Start small, start safe. Stick to manageable properties like apartments or townhouses, where risks are lower, and lessons are easier to learn. Once you’ve built your experience and financial stability, graduate to high-value commercial or resort properties. They offer bigger rewards, but steeper learning curves and trickier management. Remember, slow and steady wins the race. 

WHAT ADVICE THE EXPERTS HAVE FOR YOU – THE NEWCOMMER INVESTORS? 

Before diving into rental properties, understand your motives, said Judy LeMarr, Real Property Management’s chief executive. Cash flow now, appreciation over time, or a quick flip? Your location impacts your strategy. Midwestern suburbs might offer stable income through residential rentals, while areas near military bases or factories, like Georgia, might favor Grade B multifamily properties for a consistent tenant pool. 

LeMarr also stresses preparation. Inspect roofs, windows, plumbing, and plan for future repairs. Keep a financial cushion for these inevitable expenses, along with two months’ rent to bridge tenant turnover. By being strategic and well-equipped, you can navigate the world of rental properties. 

Lukas Krause, a seasoned investor, agrees that real estate can be a good retirement investment because rental rate increases have historically exceeded inflation. An investment property purchased with a break-even cash flow can, according to Krause, turn a profit for an individual investor in years.  

He further stated that rental growth rates do differ depending on the location. Three main factors that affect rental rates are the number of jobs, the level of wages, and the supply of available housing in a market, and “smart investors focus on markets with job and wage growth.” 

Rental real estate is not a gamble but an investment in your future. Like any business, investing in rental real estate requires decent time, study, dedication, and capital. Take control of your strategic investment plan step by step before jumping into any financial path. 

Reece Almond

Disclaimer: The blog articles are intended for educational and informational purposes only. Nothing in the content is designed to be legal or financial advice.