Rising home prices are causing landlords to choose between equity or cash flow. For those deciding to list, earnings are substantial, investment property owners told Inman
Ryan David is about to list one of his Pennsylvania rental properties for $129,900. Never in his wildest dreams did he think he’d be selling it for nearly double the purchase price.
But thanks to home price appreciation, the once unimaginable is now a reality. While many investors are buying up properties at a record pace, there’s a subset of them offloading.
The National Association of Realtors (NAR) found that the median existing-home price in the U.S. hit $363,300 in June, the highest on record and the 112th month straight of year-over-year home price gains. Prices are expected to continue rising, but the rate at which they rise is expected to drop drastically. Per CoreLogic, from May 2021 to May 2022, home prices are forecasted to have grown by just 3.4 percent.
The general consensus: Now is prime time for sellers to earn big.
According to a CoreLogic Homeowner Equity Report, from the first quarter of 2020 to the first quarter of 2021, homeowners with a mortgage gained an average of $33,400 in equity.
But with inventory tight, many primary residents are opting to hold onto their properties rather than sell in fear that they won’t find another home to move into.
On the contrary, landlords have the freedom to cash out and earn big.
Ali Wolf, chief economist at Zonda, told Inman that the emerging trend is being driven not only by the desire for a major pay day, but with sales inventory so tight and so in demand, investors don’t have to put much time or money into updating their homes before listing them.
“Investors are typically getting into real estate for two reasons: for cash flow or for home price appreciation. Right now, we are in a housing market where either strategy is expected to pay off because rental inventory is tight and rents are rising, and sale inventory is tight and home prices are rising,” Wolf said.
For the landlords deciding to sell, she continued, their properties are suddenly worth much more than what they purchased them for. The opportunity to collect a quick and large return on the investment is more enticing than the monthly cash flow from tenants.
Keep reading on Inman.
Related Links
Thinking of Buying a Lakeside Home? 9 Things You Should Consider First
Why buying a condo for your college kid could be a smart financial move
As Featured in West + Main Home Magazine: Horoscopes for Home
If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.
