With 8 out of 10 American millionaires choosing real estate as their top investment in 2014, it’s hard to see the sector not performing on all cylinders by the end of the year. According to Bloomberg News and a survey of U.S. millionaires by Morgan Stanley, 77 percent of those with a million dollars or more in assets are investing in real estate this year. Direct investment in real estate is the preferred choice, followed by other forms of passive income investment like REITs. Between the volatility of stock markets and the need for brick and mortar security, it is easy to see why successful investors choose real estate. The above average returns and incredible growth prospects for residential rental property values in the U.S. is too attractive to ignore.
Foreign investment capital isn’t letting U.S. opportunities slip by either. Canadian pension funds have been plowing into U.S. commercial property after finding little to buy north of the border. Norway’s sovereign fund (the largest in the world) recently made its own move into the U.S. with over a billion in acquisitions. Chinese buyers just announced an almost $2B deal for the iconic Waldorf Astoria in NYC.
All of this action and capital injection is only going to fuel more economic growth in the United Sates. It will fuel more construction and more jobs. If things don’t brighten up in London or Hong Kong, these recent foreign investment amounts will just be the very tip of the iceberg of incoming capital over the next 12 months.
Both domestic and foreign real estate investors are now being served by U.S. funds, which have established new ‘buy to rent’ lenders. The new menu of conduits are promoting very attractive terms for rental property investors that want to leverage capital in existing portfolios as well as obtain new credit lines for scaling up portfolios from the ground up. They have no limits on the amount of properties investors can own and have mortgaged, and are beginning to aggressively compete against each other for business.
For those passive income seeking investors that are equally as aggressive, there are virtually no limits to the amount of inventory either. MLS and Realtor inventory may be softer in some pockets of the country, but there are masses more in single-family homes sitting out there to be acquired. Those with the contacts will find far more wholesale properties to acquire than they can handle.
With all of the activity, and historic real estate data on their side, it is hard to see how cash flow and wealth preservation seeking real estate investors can go far awry when loading up on rentals today. Of course there are terribly distressed properties which may need a ton of work (or even tearing down), and there may be problem tenants which need to be replaced. However, sticking to sound and proven real estate investment principles and opting for sound turnkey property investment programs should help leap 99% of these potential pitfalls.
Starting with turnkey from the beginning is also smart. It is hands free and stress free. Becoming a DIY landlord or fixing up and renting are options for some, but must be done with a solid timeline and real plan for handing it all off to professional property management for true financial freedom. After all, it’s no use having all the net worth and incoming cash in the world if you can’t take a weekend away to travel, holidays off with family or get a good night’s sleep for tenants calling about the most minor things.
Of course there may be some small corners of the country still trying to turn around, but even previously dull areas have recently experienced a huge growth in housing needs and activity. Urban or suburban, both are hot right now, as are both low and ultra-high ends of the market. This is all especially true when it comes to rentals. There just aren’t enough vacant residential rentals in most parts of the country. This is driving up rental prices fast, and bolstering the positions of landlords.
Many have also missed out on the point that the current rapid growth in the U.S. real estate market is enabling more individuals to retire early already. With these individuals leaving. jobs it means more jobs for those in the workforce and rising economy and housing market, even if all the data isn’t showing up in the headlines yet.
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