I do get asked a lot about why is the mid-west US market so good for rentals? The answer I believe comes down to two main reasons:
1) First and foremost, affordability! The actual cost of the property is cheaper. As the land value in the mid-west US is very inexpensive and abundant (unlike our land costs on the eastern seaboard of Australia – wow!) the property prices are much more affordable. This enables us to get into the market for much less capital and helps with the return
2) Secondly, the actual rental returns are not tied to the cost to purchase the properties. Rental prices (just like any other commodity) is tied to supply vs demand. If you have a region with massive amounts of vacant properties for rent, you will find the rental rates go down – will be very cheap. If on the other hand, there are not many rental properties available, then rents will be high, rising and more expensive
The mid-west US has some fantastic employment opportunities for job seekers, some fantastic schools and universities for studies and the affordability to live there is very attractive. Many Americans are still scarred by the GFC crash and find purchasing homes harder and the job market harder so they are happier renting than owning. The dream to own your own home with the white picket fence is almost gone now, very few millennial’s are striving for this. Also, even more high income earners are finding it better to rent where they live, and purchase investment properties where they can get the best return!
Click on the graph below to go to a recent article by Maven Money in the US analysing renting vs Owner Occupied properties for higher income families – the results are astounding!
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