Generating passive income through real estate has always been appealing, and there are many ways to do it, from single-family homes to multi-family units, as well as long-term and short-term rentals. However, with the recent fluctuations in the housing market, is buying a rental property still a good investment in 2024?
At the Potempa Team, we help clients secure financing not just for primary homes but also for investment properties. In this guide, we’ll explore the current state of the U.S. housing market and what to expect through the end of 2024 and early 2025, helping you make informed decisions for your next rental property purchase.
Rental Demand Continues to Outpace Supply in Many Markets
With homeownership becoming less attainable for some due to rising home prices and mortgage rates, more people are turning to renting as a long-term solution. This growing demand, coupled with a limited supply of available rental properties, allows landlords to maintain higher occupancy rates and command competitive rental prices. As a result, investors can enjoy strong cash flow and consistent returns, making rental properties a smart and stable investment in today’s real estate market.
In the post-pandemic years, many people are seeking more flexible living situations, driven by the rise of remote work and a renewed desire to travel. With the ability to work from anywhere, professionals are no longer tied to a single location. This shift has opened new opportunities for real estate investors, as properties that cater to this demand for flexibility—whether through short-term rentals or adaptable living arrangements—can command higher rates and consistently attract tenants.
Short-Term Vacation Rentals Are Still Enjoying a Boom
The popularity of short-term vacation rentals has added another layer of opportunity for real estate investors, especially in high-demand tourist destinations. Platforms like Airbnb and VRBO have made it easier than ever to rent properties to vacationers, often at rates much higher than traditional long-term rentals. With more travelers seeking unique, home-like experiences over hotels, short-term rentals offer investors the chance to maximize their income potential, especially during peak seasons. This growing trend boosts cash flow and allows for flexibility, as owners can choose to use the property themselves or adjust availability based on market conditions. Events like the Superbowl, the upcoming 2028 Summer Olympics in LA, and even major concerts like the Eras Tour can be a particular boon for investors. During these events, properties can be rented at much higher rates, offering excellent short-term returns.
Interest Rates Are Expected to Drop
As the Federal Reserve (the Fed) has fought to curb inflation over the last few years, interest rates have remained higher than many investors consider attractive. This fall, all that is expected to change. After updated US economic reports were released, mortgage interest rates have dropped since late summer. The Fed is set to meet next week, and most experts predict they will cut the standard interest rate, with mortgage rates likely following suit. Rates are expected to continue decreasing into 2025, offering investors more attractive opportunities to finance their next property at a rate that aligns with their financial goals.
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People Always Need a Place to Live
No matter the economic climate or market fluctuations, housing remains a necessity. As populations grow and shift, and as cities expand, the need for housing only increases. For investors, this provides stability and security, knowing that no matter how the market changes, there will always be demand for well-located and well-maintained properties. Additionally, real estate typically appreciates over time, so while you’re earning rental income, the value of your property is likely growing, adding to your long-term wealth.
With demand for rentals continuing to outpace supply, the rise in short-term vacation rentals, and the potential for lower interest rates on the horizon, buying a rental property is still a good investment for many. Whether you’re seeking immediate cash flow or long-term wealth building, real estate is a reliable choice. Reach out to the Potempa Team today to explore our competitive loan options and get expert guidance for your next investment!
