Should I Invest in a Rental Property?
Like many sectors of the economy, the real estate market is subject to seasonal fluctuations in supply and demand. Any Econ 101 class will tell you that when demand shifts up, supply then increases to equalize towards pareto efficiency. Along these lines, desire for rental properties traditionally experiences a boom in the summer and a relative decline in the winter. This trend is particularly pervasive in urban areas (and especially in Washington, D.C.), which makes early spring the ideal time to purchase a rental investment property.
Washington, D.C. has become a particularly attractive destination for such young, educated millennials over the past decade, many of whom will enter the workforce with fairly substantial starting salaries and signing bonuses. Naturally, many of these recently graduated college students plan to move into the city either directly after finishing school or towards the end of August (right after enjoying their final summer-long vacations). According to an article published in the New York Times, the District of Columbia experienced a 36 percent increase in the number of college graduates aged 24 to 36 from 2000 to 2012. This influx has correlated sharply with (and directly contributed to) the development of the U Street corridor, Dupont Circle, and other vibrant young urban neighborhoods in the District.
According to Professor Edward Glaeser, an economist at Harvard University and conductor of the most comprehensive study, “They [young, educated people] want something exciting, culturally fun, involving a lot of diversity — and their fathers’ suburban lifestyle doesn’t seem to be all that thrilling to many of them.” Washington, D.C. has come to offer exactly this kind of lifestyle and environment, and as more graduates stream in after finishing school, one can expect the periodic summer demand for rental housing to continue into the foreseeable future.
According to data released by RealEstate Business Intelligence, which, in a recent report, found that more homes in the greater Washington, D.C. area were sold in June 2015 than in any month since June 2006. Since then, the national housing market has continued to recover from the 2008 financial crisis.
If you are considering purchasing an investment property sometime soon, then now is the time to take advantage of seasonal fluctuations.
Often times, savvy property investors recognize the prospect to capitalize on seasonal market shifts too late in the process. Although a management company can help your rental property achieve move-in condition fairly quickly, the process for legally becoming a landlord, ensuring the property meets all safety and zoning requirements, and, of course, finding an appropriate tenant is more time-consuming and comprehensive than one might think.
In order to become a landlord in Washington, D.C., property investors must purchase a Basic Business License, ensure their property is properly inspected and passes a variety of different zoning and safety tests, make the home presentable for showings, and, of course, market it to prospective tenants.
Since Washington, D.C. is a relatively tenant-friendly city, it’s best to cover all of your bases, and all of these steps require a certain degree of preparation, scheduling, and discipline that may be difficult to achieve on a tight time frame. That’s why, in addition to the possibility of taking advantage of decreased prices in months with relatively little demand, the early spring is a great time to start the property search and begin making preparations for the summer.
Ultimately, real estate is a long-term, high reward investment, so of course, every prospective landlord should exercise due diligence when determining whether or not to engage in it. That being said, if you are seriously considering buying a rental home within the next year, it would be wise to do so in the coming months. This will allow you to take advantage of seasonal fluctuations in demand, get the property ready aesthetically, legally, and functionally in a reasonable period of time, and market the home for rent.
As Washington, D.C.’s #1 rated property management company, Gordon James Realty can help you begin the search for your ideal rental home, take care of the logistical headaches inherent in being a landlord, and provide knowledgeable, trustworthy counsel throughout every step of the process.
For more, read this in the Washington Post.