This article is presented by Connect Invest.
An increase in housing supply over the last few years has left landlords searching for tenants longer. Even as construction falls amid increased costs, the volatility of interest rates and increased operational costs are eating into margins. It’s enough to make seasoned investors wonder if rentals are still worth the hassle.
The State of the Rental Market
The rental market is seeing a bit of an influx, with 640,000 apartments built in 2024 and 506,000 on track to be built by year’s end. While that’s great news for renters, it means existing landlords have less leverage than they did a few years ago.
That could be one reason why the average number of days rentals were vacant have gone up slightly, from 39 days to 40 days, while apartment occupancy rates have dipped slightly, from 93.7% in 2024 to 93.4% so far this year.
That increase in supply has also meant that rents have fallen from their peak in 2022 by about $50 a month, as landlords offer discounted rates to entice tenants. Meanwhile, apartment vacancy is at a 15-year high of 6.3%.
Although construction has fallen amid financing concerns and increased prices, and rent prices have increased in some areas as a result, uncertainty around supply and demand remains a headwind.
Real Estate Alternatives to Being a Landlord
So what’s an investor to do in this uncertain rental environment? There are smarter ways to increase cash flow consistency and gain passive exposure to real estate-based assets.
Some of the most common ways to invest in real estate without being a landlord include:
Real estate notes
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