If you’re a landlord, you’re patting yourself on the back right now. Or, if you’re about to invest in your first rental or even an apartment building but are still questioning your move, there is some interesting news that appeared in a story* today on cnbc.com. First, mortgage rates have already priced in the next all but guaranteed rate increase next week and financing costs are still very near historic lows. That keeps long term mortgage payments low. But the second part of that equation is even better—record setting demand for rental housing and rental incomes at record highs. Rental occupancy, according to the story, is at the highest level not seen in 30 years and rental rates are still rising at a respectable 3.5 percent clip. How does an annual 3.5% bump in cash flow every 12 months sound? A little better than maybe a CD or an average mutual fund?

 

Homeownership is now at the lowest level in 50 years and until this trend reverses course, landlords will reap the profits. There are various reasons why rental demand continues on this path but those who do want rental housing have seen their incomes decline by 9.00% since 2001. Mortgage lenders have over the past few years relaxed their lending guidelines and are gradually continuing to do so yet it’s also the reluctance of renters to take the leap and buy instead of rent that is also contributing to higher rental rates. Younger, so-called millennial buyers prefer the flexibility of renting and haven’t taken the sage advice of their elders to invest in real estate. The last time they looked, real estate wasn’t a very good choice in many areas. Some even saw their parents or those they knew lose their homes during the massive foreclosure wave.

Buyer reluctance, increased demand and ultra-low vacancy rates are contributing to perhaps the best time to own rental properties in decades and the trend doesn’t show any signs of slowing down. That said, if you are second guessing yourself for your next buy even though the numbers are convincing, the data shows owning investment real estate in today’s market can be an attractive add to your portfolio.

*Housing’s New Crisis- Half Your Income for Rent  cnbc.com  December 09, 2015