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There’s Money to Burn in These Hot Rental Markets

U.S. housing markets faced an unexpected boom in 2020 that carried over into 2021 and is still remaining at a high in 2022, leaving renters paying some of the highest monthly rents in history.

Between February 2021 and February 2022, the cost of rent rose by an average of more than 15% nationwide, according to data from Yardi Matrix. Of the U.S.’s 100 largest cities, 91 of them saw rent increases in this period.

Analysts expect rent costs to keep increasing as eviction moratoriums enacted at the height of COVID-19 are lifted, effectively allowing landlords to remove old tenants and bring in new ones at higher rent prices to recoup money lost during the pandemic.

Some landlords went nearly two years without being paid by tenants because they were protected by state and federal eviction moratoria. Property owners and rental property real estate investors expected to receive $46 billion from the government to help offset those costs, but only $3 billion has been paid out as of March 2022, according to U.S. Treasury Department data. In the absence of government support, increased rents are the way landlords can keep investments solvent.

Demand is also strong for rentals. Many prospective homebuyers have faced challenges in purchasing a home due to the high-demand/low-inventory real estate market and have been forced to rent, alongside those who sold their homes at the height of the market and now are displaced until they can secure a new property. The U.S. rental market is booming, but single-family rental homes are still not affordable for most Americans.

Data from the National Apartment Association shows that the average renter earns between $60,000 and $70,000 a year and spends almost 28% of their income on monthly rent. Combine that with more buyers shut out of the home purchase market, and it’s hard to imagine SFR and multifamily rental property vacancy rates falling in 2022.

These are good signs for rental property investors on the hunt for cities with the best rental real estate markets that will provide the highest rent yields. And believe it or not, all three of these are in Florida.

Hottest Rental Market #1: Miami, FL

Rent Growth Rate YOY (Feb. 2021 through Feb. 2022): 27%

Miami has quickly become one of the best cities to invest in rental properties. People and businesses are relocating to Miami and South Florida because of the state’s pro-business stance and the absence of a state income tax.

Miami’s housing market is the seventh largest in the U.S. and the second largest housing market in the southeast.

Two-thirds of Miami residents rent – a rate rivaling that of New York City – because of the many people working seasonal and temporary jobs in the state’s tourism industry, a limited housing supply, and the high cost of housing relative to local wages.

As a result, many investors in the Miami real estate market buy single-family homes to be carved up into a multifamily property with multiple units, each one rented out individually.

The Miami real estate market offers diverse opportunities to real estate investors, allowing them to choose which rental markets they want to profit from. Considering the overall state of the housing market in Miami, the city presents the opportunity for long-term rental investors to find cash-flowing properties.

Hot Rental Market #2: Tampa, FL

Growth Rate YOY (Feb. 2021 through Feb. 2022): 26%

Florida’s greater Tampa Bay area has consistently ranked as one of the best markets to invest in real estate. Tampa’s strengths include its economic growth and steady job growth featuring higher-paying professionals and business services.

As a result, demand for housing in Tampa has risen rapidly, leaving a tight inventory. Tampa currently has less than a month’s worth of housing inventory – a 36% decrease from 2021.

Tampa properties have a track record of being good long-term real estate investments because of the growth in employment opportunities, which has created a persistent imbalance between supply and demand. As a result, the rental market continues to be very strong in Tampa Bay.

Hot Rental Market #3: Orlando, FL

Growth Rate YOY (Feb. 2021 through Feb. 2022): 26%

The multifamily market in Orlando is booming, making it the hottest segment of the market for real estate investors in the central Florida market and one of the best rental markets in the U.S.

Occupancy for rental properties in Orlando has increased from 94% to 96% over the past year, which means renters are waiting for the 16,571 new rental units projected to be completed by June 2022. Currently, Orlando’s market ranks 12th out of 98 nationwide markets in multifamily development activity.

Orlando’s rental market remained relatively flat for a few years, but over the past few months, it experienced dramatic increases in price and demand, making it a hot investment for those looking to grow their rental portfolios. Currently, Orlando ranks 23rd of 53 large metros in the percentage of single-family rentals.

New construction in Orlando has picked up as well. Overall new construction permits have increased 26% YOY, with gains in both single-family and multifamily properties.

The investment in single-family construction in Orlando is creating build to rent investment opportunities. Orlando’s build to rent, single-family rental, and new construction markets should continue to be a sound investment for real estate investors who are considering the Florida city.

There’s Money to Burn in These Hot Rental Markets

The US rental market is undersupplied everywhere, and since housing prices are reaching ever higher, more Americans have turned to renting. Despite increasing rent prices, real estate investors have experienced great success in single-family rental, multifamily, and build to rent markets.

The rental market has shown signs of continuous improvement with rental prices climbing in 2021 and continuing to rise fast in 2022. The National Association of Realtors projects rent prices will rise faster than home prices in 2022, which could mean investors find more opportunity in build to rent communities and multifamily developments.

Investors have several options when it comes to rental property loans and private lenders, but Lima One Capital has the best suite of rental loans for investors looking to add to their real estate investment portfolio.

As experienced hard money lenders in Florida and across the nation, we’re able to move quickly when you find the right investment opportunity. Our lending team will help guide you through our rental loan programs regardless of your experience level, and help you purchase, refinance, or cash-out individual rental properties, as well as entire portfolios.

Contact us today to discuss your next deal, or if you have a deal in hand, you can speed up the process by applying now.