Although areas that command high rents are initially attractive, when rental rates exceed 30% of the neighborhood’s median income the investment property market might be headed for unsustainable heights, Villacorta said.
“Depending on the investing horizon, a higher proportion of income needed for rents could be a risk and a reward,” he said. “In the short term, surging rental rates indicate that there is strong demand for presumably limited inventory, which portends higher returns for the investor. In the long term, however, these low-supply markets are prime targets for larger multifamily construction or increased single-family home production.”
Another option is to invest in a multifamily property from the get-go, said Sep Niakan, owner and managing broker at HB Roswell Realty and founder of the condo listing site CondoBlackBook.com.
“It’s always easier to manage both the property and multiple tenants on a single property than multiple tenants in multiple properties,” Niakan said. “That said, another way to simplify your rental investment is to purchase a condo, where you will have to spend considerably less time maintaining the property than an independent property.”
Read: Homes Won’t Be Affordable in These Cities Within 10 Years
