Renters are increasingly ditching their families and roommates to live alone, according to a report from RentCafe.
The number of solo renters increased 6.7% between 2016 and 2021, reaching 16.7 million people. Because of the pandemic and social distancing, there was a peak in 2020, reaching a record 17.7 million. Living alone is now the most popular living arrangement.
While the number of lone renters grew, renters with roommates became less common. After a 6.3 million peak in 2019, that number sat at 5.8 million in 2021. The number of people renting with family followed a similar path, dropping from 71.3 million in 2016 to 68.1 million in 2021.
Among the metros RentCafe analyzed, the city with the largest increase of lone renters between 2016 and 2021 was Salt Lake City, which saw a 24.9% boost. The report said cost of living and healthcare were key factors in the area’s migration.
These factors were also present for the next three cities on the list, all in Texas: McAllen and San Antonio, where the share of solo renters grew 24.2% and 21.7%, respectively, and Austin, where the demographic grew 23.9%. Dallas also made it into the top 10. Texas’ affordable housing crisis is leading more people to be long-term renters, a position many across the nation are in.
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While apartment construction reached a 40-year high in the third quarter, renters are still experiencing skyrocketing rents. Earlier this month, the Supreme Court declined to hear a case on rent control in New York City that could have affected rent control laws nationwide and made a pathway for rent-stabilized housing. In July, the Biden administration called on landlords to eliminate surprise fees for tenants. As a result, a number of states passed legislation on the matter.
Baby boomers and millennials make up the largest proportion of people living alone, representing a cumulative 61% of solo renters. RentCafe reported that because of accessible shopping and services, as well as smart home tech, aging in place is becoming increasingly feasible.
Income is also a factor. Baby boomers need an income of about $50K to be a solo renter, which is $16K more than what an average renter would need to afford rent. Millennials represent 29.5% of Americans renting alone, and solo renters in this generation earn $56K on average, $22K above the average renter’s income.
These two groups are followed by Generation X, who make up 21.3% of solo renters; the Silent Generation, representing 12.8%; and Gen Z, with 3.9%, or 640,000 people.
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Aly J. Yale
Cash-out refinancing is pretty common in real estate investing. An investor will cash in on the equity they have on an existing property and then use those funds toward a down payment on their next property. Rinse and repeat.
That complicated process may soon be unnecessary thanks to a new fintech company.
Downpayments, a Miami-based financial tech startup, has come up with a way for investors to tap their existing property equity to buy new properties—no refinancing required. Here’s how it works and what investors need to know about it.
How the Program Works
Downpayments essentially gives investors a loan, which they can use toward their down payment. There are two options:
- An interest-free loan of up to 10% of your next investment’s purchase price
- A 20% down payment at a “competitive” interest rate (currently 7%)
In both cases, the loan must be paid off within four years of closing.
The program can benefit investors with a number of goals. As the company explains on its website:
Depending on your circumstances, this may mean different things; it might mean preserving your savings or avoiding having to go through a cash-out refinance in order to access the capital, which often means breaking a low fixed-interest rate. It might also mean you can buy your next investment property sooner, or without an equity partner, so you can control your own destiny and have the freedom to grow your property portfolio on your own terms.
Downpayments.com
Of course, nothing comes for free. While using Downpayments won’t require you to refinance your loans, you will need to put your property up as collateral. You’ll also need to use Downpayments’ brokerage services as you shop for your next investment.
As your registered in-house brokerage, Downpayments will curate your listings, provide on-demand showings, comparable sales, and guide you to the closing table.
Downpayments.com
Essentially, you won’t pay Downpayments directly, but it will get a commission from your eventual property purchase (just as any real estate agent would).
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Is Downpayments Right for Your Portfolio?
Right now, Downpayments is only available to investors purchasing properties in Florida, but the company says it’s expanding to other states later this year. (No word on what those states will be, though.)
Still, even if the program’s available in your area, think carefully before proceeding. While it’s billed as an alternative to cash-out refinancing, Downpayments doesn’t help you avoid financing altogether. In fact, it just adds another loan to your mix—meaning extra monthly payments to balance and an even further leveraged property.
If you do use it, make sure you’re on a good budgeting system and are prepared to make your payments—on time, every time. As with any loan against your property, there’s a risk of foreclosure if you’re unable to make your payments.
You’ll also want to consider the brokerage requirements, especially if you have an agent you typically use when vetting new investments. Using Downpayments could mean forgoing that agent’s guidance or, potentially worse, doubling down on commissions if you decide to use both services.
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By Justin Gesso
Whether you’re taking your first steps or fine-tuning your strategy, understanding the fundamental language of real estate is paramount. In this post, I’ll cover the top 5 real estate investment terms that are essential for every investor’s toolkit. From cash flow to leverage, these terms form the bedrock of successful investing. I think it is also important to know the right meaning for these terms and many people stretch the meanings or completely change them!
So, let’s dive in and equip ourselves with the knowledge that will shape our journey towards financial prosperity.
1. Cash Flow – The Foundation of Financial Success
Let’s start with a term close to every investor’s heart – cash flow. Beyond the straightforward inflow and outflow of funds, it serves as the cornerstone of financial success in real estate. It is one of the primary metrics I use to make purchase decisions. I also look at how good the deal is and how much value I can add.
Many people will tell you that cash flow is simply the rent minus the mortgage and insurance. However, if you want to know the true cash flow you will need to know all of your expenses. Here is an example of what true cash flow looks like:
- Rent: $2,000
- Mortgage: $1,100
- Taxes: $200
- Insurance: $200
- Hoa: $50
- Vacancies: $100
- Maintenance: $200
- Property management: $180
One investor might tell you the cash flow is $500 a month but they are leaving out many of the expenses the property will incur over time. The true cash flow would be -$30!
2. Cap Rate – A Metric for Strategic Decision-Making
Cap rate, a metric mostly used on commercial properties and multifamily housing gives an idea of what the property will make without financing and what the property is worth based on the NOI or net operating income. The basic formula is:
net income / price = cap rateThe Cap Rate formula may seem simple enough, but it can be manipulated very easily. Investors may not include all the expenses in the NOI, or they may use projected income instead of actual income. Never take these numbers as absolute without digging into them.
3. ROI – Evaluating Investment Performance
Return on Investment (ROI) serves as the scorecard for your property’s performance. As a pair to cash flow, ROI helps you determine what the property will make based on many factors like loan pay down, appreciation, and value add. Cash flow looks at what the property makes on a monthly basis and ROI looks at the big picture.
ROI is not easy to figure because some years may have a huge increase in value thanks to adding tenants or making repairs while other years may have much more modest returns. You would figure ROI on an annual basis and may want to separate out first-year ROI from the later years’ ROI because of those jumps in value.
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4. Leverage – Maximizing Potential While Mitigating Risks
Leverage is the prime weapon of real estate investors if you are looking to scale quickly. With leverage, you only invest a fraction of the total purchase price, which can cause your returns to be significantly higher than investing in something like stocks. To achieve leverage, you use financing. Financing is one of the most important aspects of investing in real estate. You can make more money with loans than by paying cash.
On this site, I talk about the many different, creative ways you can finance real estate investments.
5. Equity – The Silent Wealth Builder
Equity, an often-underestimated force in wealth accumulation, goes beyond property values, embodying true ownership.
equity = current market value - amount financedEquity can be built slowly through market appreciation and loan pay down. You can also build equity by adding value and getting great deals on properties. I prefer to use both! Many people may say equity does not matter because it is not cash in hand, but it can become cash in hand by using a cash-out refinance, or selling. You can even use a 1031 exchange to sell and not pay taxes on the profit.
Thanks to leverage and equity, my net worth has skyrocketed to over $10 million just from real estate.
Even better, you can use equity and leverage together to purchase additional properties and scale up your business using the BRRRR method.
Conclusion
This primer serves as a solid foundation for fundamental real estate investment terms. As you navigate real estate, I invite you to explore the extensive resources on InvestFourMore, where a wealth of data-driven insights and strategies await.
Feel free to engage with the community, sharing your experiences or seeking guidance. Here’s to your continued success in the world of real estate investment – stay informed, stay strategic, and keep building your path to financial prosperity!
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