According to recent reports, America is suffering from an affordable housing crisis. Some real estate investors may find this hard to believe, given how much more affordable U.S. housing is today than it was in the past. Still, there is no question that many are struggling. This presents some great opportunities for investors to both generate great incomes and give back to the community.
So why are so many finding it tough to find housing today, what advantages are there of investing in lower end housing, and what are the most profitable ways to engage in this sector?
Luxury is Trending
Luxury properties are trending. High-end home buyers are busy shopping, and this will only pick up by the end of the year.
At the same time, the media is reporting that home builders are increasingly moving into the top end of the market. Affluent families are tearing down homes in the Hamptons to put up larger estates and higher-end homes are being flipped more frequently. In fact, high-end home flipping has surged by triple digits in some areas, as real estate investors hunt for bigger dollar payouts.
While the attraction to luxury homes is completely understandable, and many report as much as four times the profits from, there are some solid reasons to get into affordable housing.
America’s Big Affordability Issues
According to a new Bloomberg report, “home purchases by institutional buyers reached an all-time high in September.” At the same time, half of all real estate transactions involved cash buyers.
On top of rising interest rates and home prices, this can make it pretty slim pickings for those looking to buy a home, even if they qualify for a home loan.
Unfortunately, at the same time, rental rates are headed up significantly. Many can’t afford the rent hikes on the properties they have been living in, even if they have maintained steady employment.
This has led to some very significant spikes in homelessness, according to recent data. For the first time in 4 decades, the majority of students in the West and South are now considered ‘poor.’ Worse, there are now almost 1.2 million homeless students enrolled in America’s public schools. The highest concentrations were found in FL, TX, NY and CA. There are now 72% more homeless kids in our schools than before the recession started, and the problem is getting worse, with a 10% year over year spike.
Problems Need Solutions
Lack of affordable housing is also a big issue for cities and local governments. They require a good mix of residents, desire their streets to look clean to attract business, want to reduce the cost of law enforcement and their own financial burden for providing housing.
Government agencies and politicians need ideas for creating solutions and will put money in, or at least offer tax breaks to those that come up with them. In many areas, they are even giving away property, or will seize it for real estate investors that have plans for ‘higher and better use’ for it.
Providing a solution can be a win-win for all sides, help investors generate great incomes and help them to give back at same time.
What creative ideas can you come up with?
