As the real estate market continues to bounce back from the pandemic and inflation-fueled difficulties, noted authority on the subject, Grant Cardone, claims that owning homes that are utilized as rental properties is only going to grow even more financially beneficial and lucrative in the coming years.
Over the course of the past several years, the price of purchasing a home has surged to unprecedented new heights across the country, and interest rates have continued to rise alongside it. As a direct result of this, many potential home buyers have been kept waiting, anticipating a near future in which prices and rates return to a more affordable reality.
However, as this period of the real estate market pricing drags on, many of those same would-be buyers have been forced to rent homes while they wait. Thus, homeowners who had already invested in owning rental properties prior to this pricing increase are making a fortune off of renting out their properties.
Posting on the social media platform X (formerly known as Twitter), Grant Cardone noted how this series of events has created a cyclical loop, in which the pricing of rental homes continues to go up specifically because the owners of these properties are keenly aware of the ludicrously high real estate pricing right now, and in setting such high rent, are actively preventing their tenants from becoming homeowners.
“Insurance is out of control, with the cost going to $2,500 a year, compared to renters’ insurance policy, which is $180.” Cardone goes on to elaborate that Gen Z has long preferred renting over owning property because of the importance the generation has historically put into being flexible in their living style and mobility. While the Baby Boomer generation once prioritized homeownership in their younger days, their generation is now focusing more on renting as they enter their retirement years and look to capitalize on the equity they’ve built up for latter-life costs.
Cardone states that he believes developing affordable housing in this current market is “unachievable” due to the inflated costs of labor and materials and the current financing challenges faced. He also notes that the current home mortgage interest rate percentages and windows explicitly encourage homeowners to rent rather than sell, as 60% of home mortgage interest rates are at 4% or lower for 30 years. These high prices incentivize homeowners to rent out their properties to help pay for the high-priced mortgages, further adding to the cyclical feedback loop of the market.
It’s also critical to note the role that institutional ownership of homes plays within this market. While institutional ownership of rental homes is currently below 5% in most markets, it continues to have a profound and lasting impact on the pricing of the real estate market as a whole. This is all the more notable in specifically targeted areas where institutional ownership has systematically raised housing prices to unparalleled heights. For example, in Atlanta, institutional investors own over 4% of rental homes, and the housing costs have ballooned exponentially, just as Cardone is predicting.
