Buying an investment property is one of the most popular ways to invest in real estate. Whether you plan to offer the property to renters or fix it up to sell for a quick profit, here are the latest statistics on investment and rental properties to help you make your choice.
Investment and Rental Property Statistics
- There are 19.3 million rental properties in the United States, of which 85.6% are single-family (detached) properties. There are a total of 49.5 million rental properties in the United States (U.S. Census Bureau).
- Builders plan to add a record 518,108 new apartments to the U.S. rental market in 2024. (RentCafe)
- Rental property owners are primarily individual investors (70.2%), followed by LLCs and LLPs (15.4%), and real estate companies and REITs (1.2%). (U.S. Census Bureau)
- The average annual cost of owning a single-family home in the United States is $18,118. This includes home insurance, property taxes, maintenance, and other costs. (Bankrate)
- For apartment owners, net operating income (NOI) has fallen from a high of 25% in 2021 to 3% in the third quarter of 2023 due to rising costs and insurance premiums. (Joint Center for Housing Studies, Harvard University)
- As of July 2024, multifamily rents have increased 2.6% year over year. (Zillow)
- The typical real estate investor’s home sold for $190,404 more than the purchase price as of June 2024. (Redfin)
What is an investment property?
An investment property is a property whose primary purpose is to provide income to its owner, usually in the form of rental income. In the residential market, this means a one-unit (detached), two-unit (duplex), three-unit (triplex), or four-unit property that is rented out to short-term or long-term tenants. Typically, owners of investment or rental properties do not use the property as their primary residence, as opposed to a second home or vacation home.
Current Investment Property Rates
Mortgage interest rates for investment property loans are higher than for primary residence loans. Banks and other lenders charge higher interest rates for investment property loans to compensate for the higher risk of properties that are not owner-occupied.
Is real estate a good investment?
While any type of investment carries some degree of risk, real estate is widely considered to be one of the better investments.
“Potential benefits of owning residential property as an investment include passive income, potential tax benefits from the deduction of mortgage interest and other expenses, property value appreciation and portfolio diversification,” says Mark Hamrick, senior economic analyst at Bankrate.
“Protection from inflation is another potential benefit,” says Minette Schwartz of The Schwartz Team at Compass, a real estate brokerage in Miami Beach, Fla. “Because rents often rise with inflation, your rental income will rise over time, maintaining or even increasing your purchasing power.”
Still, you may end up with unexpected maintenance costs or vacancies that are hard to fill.
If you need cash quickly, selling real estate takes much longer than other investments, Hamrick says.
“Market volatility is another factor that can affect the profitability of your investment,” Schwartz says. “Property values fluctuate depending on the region and economic conditions. For example, unemployment in an area could reduce demand for rental properties, resulting in lower rents and longer vacancies.”
As with any investment, risks like these can have a significant impact on your profits if you’re not prepared for them.
