The principle theory behind the growing demand for real estate is that the earth is only so big, the population is increasing, and people will always need somewhere to live. Although this is true across the board, it is a far more tangible reality for families. While single people can often "bunk up" with a friend or crash with the cousins for a few months, families tend to have needs that preclude this kind of ad hoc housing; they often require a single-family rental to call home.
For this reason, 2020 is shaping up to be a strong year for Detroit's single-family rentals. The principle behind the demand is simple: families—large and small—are growing, and they need a place to live. An examination of recent trends in the job market and rental market, as well as population growth, reveals some surprising facts regarding the need for single-family rentals in 2020—facts that make Detroit an attractive place to grow your real estate portfolio.
Family-Friendly Jobs on the Rise
Leisure and Hospitality
It's common for both the mother and father to work these days to make ends meet. In non-nuclear families, adult children may join a parent in the workforce—even grandparents and extended family may have jobs. When someone needs to grab work to make ends meet, they often turn to the leisure and hospitality sector.
Recent data supports this fact. More and more family members are choosing leisure and hospitality jobs in the U.S. Furthermore, Detroit has outpaced the rest of the country. Leisure and hospitality jobs are on the rise, growing 10% faster than the rest of the nation.
People coming into Detroit for new jobs in this sector are going to need places to live. Also, as jobs expand, so do families. Single-family rentals in Detroit are necessary to support the growth of the leisure and hospitality sector.
Mining, Logging, and Construction up 7.1%
The growth of mining, logging, and construction jobs in Detroit has well-outpaced the rest of the country at a blistering 4.5%. Family heads often turn to these industries to support their loved ones—particularly because they don't necessarily require time-intensive schooling and certificate programs. This is especially true for entry-level positions, which family heads can secure to either continue their career path or grab some extra money to make ends meet.
Steady Population Growth
Detroit has recently experienced an increase in population. This increase is significant, especially considering the drop in population the region started experiencing in the 1950s. While Detroit hasn't fully recovered from the impact of the loss of manufacturing jobs, a growth in population is shows the need for single-family housing rentals in 2020 is going to be on the rise. With median property values currently low—but increasing rapidly—there has never been a better time to invest in Detroit real estate.
The population increase is likely due to the creation of jobs in the leisure, hospitality, and manual labor sectors. While manufacturing jobs are still not as robust as they once were, many of these jobs are often secured by young folks who are just entering the workforce—not family heads in need of single-family rentals. The proliferation of jobs traditionally held by family heads is a driving factor in the increase of Detroit's population.
It's Cheaper to Rent Than to Own in Detroit
On average, the monthly cost of owning a home in Detroit ($1,079) is 39.5% higher than the median gross rent ($773). For renters, the math is simple: Why spend more than you have to for a roof over your head? This is not only logical but practical. Across the nation, families have taken a step back from homeownership and opted to rent.
This can partly be attributed to the aftermath of the 2008 financial crisis. With an air of uncertainty still floating over the nation's job market, a family may never know when a move will have to happen. Cementing your feet in an area by purchasing a home is a risky endeavor for non-investors. Practically speaking, it makes more sense for many families to rent.
Despite the appeal of renting, in the Detroit area, the price of rentals hasn't risen as much as it has in the rest of the country. Relatively low rental prices combined with the practical value of renting is creating a higher demand for single-family rentals in 2020. Given the disparity between the demand for single-family rentals and their low prices, landlords with rentals in their real estate investment portfolio may soon see an increase in profit as property values and income continue to rise.
Renters Are Mobile
In Detroit, at least 16.2% of renters move each year. In 2020, that means roughly 56,000 people will be looking for a new place to live—and your portfolio will be ready to meet that demand. Single-family rentals in Detroit become ideal as people upgrade from apartment living.
These are just a few of the reasons why there is a rising demand for single-family housing in 2020. While the numbers are compelling, capitalizing on them with the right property investment portfolio can be complicated—especially if you're trying to rent single-family units on your own.
JMZ Management has years of experience in helping investors manage single-family rentals. This is why we put together our free guide, "Real Estate Investing: Grow Your Portfolio" to help you expand your holdings—and maximize your long-term wealth. Let's get started!