All around the country, the focus of most developers over the last decade has been in creating luxury residential units that can fetch high rents and have high sales value. For many landlords owning and renting out luxury properties is the dream they are working towards. However, on the opposite end of the spectrum lower-income rental housing is often ignored despite the high-profit potential. Many rental property investors keep away from lower income housing because they fear lower income properties are difficult to manage because they think tenants will be late with rent, there will be too much crime, landlords will have to evict tenants constantly and it is not glamorous. However, lower income rentals come with advantages over more expensive rental units that if managed correctly can lead to big profits.
Lower Income Tenants Often Receive Government Assistance: Lower-income tenants that get government assistance are often advantageous over middle or higher income tenants because the government is going to be paying rent monthly to the landlord. This guarantees that rent will be paid on time every month without having to chase around tenants for rent. In addition, lower income tenants do not want to lose government rent assistance so they will often stay in units for long periods of times and not risk being evicted which means low vacancy rates for landlords.
Smaller Investment with Greater Return: Lower income rental units are generally much cheaper to buy than middle-income rental units, yet the difference in rental price is not as extreme. Therefore, with a smaller investment, you can have an overall higher return on investment.
Fewer Vacancies: Because moving is expensive most lower income tenants are motivated to stay in a rental to avoid moving costs leading to a higher percentage of lower income tenants renewing leases. Therefore, landlords of lower income properties are more likely to have less vacant units than their landlords of middle and high-income properties.
Low Supply and little Competition: There is not much competition in low-income housing and many areas near major cities have a low-income housing crisis. Therefore, simple amenities can attract higher quality lower-income tenants.
If your thinking of entering the low-income rental market it is important to find the right area to invest in. Landlords should avoid investing in properties in areas with high crime statistics and or with lots of businesses closing. However, areas that have new businesses opening and are seeing increased residential building development are great areas to invest in before the housing prices rise.
This post is provided by RISSOFT Residential and Commercial Property Management Software, specializing in innovative and cutting-edge property management software for all 50 states. Request a demo or contact us today to receive more information.
Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.