There are a multitude of reasons to invest in rental property, especially in the current Fresno market. Fresno’s rental market is robust; renters make up more than 47% of the housing market with vacancy rates on rentals at only slightly above 8%. In fact, rental vacancy rates are the lowest in 30 years throughout California. The lower vacancy rates in rental property indicates a higher demand for rental housing, a lack of rental property inventory, or both. Couple that with home appreciation up almost 13% since last year and Fresno paints an attractive picture for investing in the rental property market.
Experts believe the lower cost of living in Fresno will fuel a 2.4% increase in the Fresno population during the course of the year. The population growth translates into an increased demand for housing, particularly rental housing. The increasing population and economic recovery in Fresno should keep the rental market strong going forward.
Pros and Cons of Buying a Rental Home in Fresno
Common factors in determining whether to invest in rental property remain fairly constant. The positives include providing diversity to your investment portfolio by moving beyond stocks and bonds, as well as developing an income stream while also building equity in real property. There is also a timely component, with historically low interest rates in place, courtesy of Brexit and the lack of Fed movement. With rates staying low, mortgages may be available to buy a rental investment property at substantial savings when compared to several years prior. The real estate rental investor also benefits from any increase in property value of the real estate purchased.
The disadvantages also remain constant for the rental property investor. For the investor or owner, there is the tenant risk with concerns that rent will be paid in full and on time. There are also concerns about property damage and, with or without a tenant, the investor will be responsible for taxes, insurance and possible HOA fees. There is also concern that if the property value decreases so might your investment. If the investor chooses to be actively involved in the management process, there are factors to be considered such as time required to advertise for rent, vet potential tenants, make any repairs needed and to check on the condition of the property periodically. The rental real estate investor must also weigh the advantages and disadvantages of having their rental property managed for them which would decrease the income stream from the property but would free the investor from the time commitments required to properly manage the investment for maximum profitability.
Fresno Rental Market Conditions
Fresno’s rental market has improved at a marginally faster rate than its housing market. Strategic Economics predicts multi-family and compacted units (many of which are likely to be rental units) will account for 40% of Fresno’s housing growth in the future. Fresno is definitely moving forward with real estate investment taking off. Growth has been the watchword recently with measurable and lasting improvement in the economy and unemployment situation. With foreclosure rates markedly declining and population rates decidedly on the upswing, the Fresno real estate market looks bright. Even Fresno City Retirement Systems (City Employee Fund) committed $30 million to two real estate investment funds in ensuring their pensions.