A new breed of rental property investment app is poised to give investors more certainty than ever before, according to a new study.
The National Real Estate Investor Research Institute analyzed the rental property industry in the United States and found that investments in new, high-quality rental properties will generate returns that rival those in the stock market, even after accounting for inflation.
According to the report, the rental housing market is a “very dynamic industry with significant risks, which include rising property taxes, increased competition, new technology, and the fact that most property owners are not in a position to earn income from their rental properties for years to come.”
The study, titled The Next Housing Bubble?, was conducted by the NREI with help from real estate analytics firm eMarketer.
The researchers analyzed nearly 200 data sets covering more than 40 years of rental housing data, including the annual percentage yield, average rent, average monthly rent, and average annual growth rate of rental properties.
The study found that average annual rental yields in the rental market are among the highest in the world, outpacing those of most developed countries.
It found that, as of 2020, the average annual yield of a rental property in the U.S. was 2.8 percent, well above the national average of 1.7 percent.
Renters can take full advantage of the new housing bubble, said NREIC executive director Greg Bier.
Renters can build homes with more spacious living spaces, new kitchens, and other amenities that offer a sense of ownership, he said.
In return, the company said, renters will enjoy the opportunity to rent their properties out for longer, which will be an investment for many renters, as well.
“It’s very exciting,” Bier said.
“When you have a real estate bubble, people are investing in the market.
We’re seeing this in the data.”
While the rental income bubble is growing, the real estate investment bubble is not, the study found.
That’s because, according the report’s authors, there is not much correlation between the rental incomes of rental owners and the average rents that they are paying.
The reason is that people are generally looking for properties that are lower-cost, and lower-income renters may not have a great experience with renting out their properties to people who have higher incomes.
“People are not spending money to buy their property, so there’s not as much interest in the real-estate market,” Biers said.
But the NERI study also found that the rental markets in cities like Chicago, New York, and San Francisco have been growing.
And the study’s authors found that cities with higher-density housing have also seen the rental gains.
“We believe there is a strong case to be made for the rental economy in general, and for certain areas specifically, as a real-world investment option,” the report concluded.