Are you waiting for a housing crash before jumping into the market? Well, you may be waiting for a very long time.
The rental market will continue to rise for the foreseeable future for one main reason—investors.
There are simply too many individual and foreign investors, institutions, syndications, and real estate investment trusts (REITs) for there to be a significant crash.
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Access to cheap money. While Mainstreet buyers (us) pay 6-7% on our new mortgages, investors still can access cheap cash.
Plus, they can liquidate a few properties in a place like California to buy an entire neighborhood in Alabama or Mississippi.
The big bad investors will swoop in to take these deals as soon as the numbers start to go back in favor of buyers (us).
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Follow the money. Investors use capitalization rates to decide where to invest their capital. For all intents and purposes, cap rates are akin to dividend yields.
As cap rates begin to favor investing in certain towns and cities, investors will be right back to buy up street blocks or build neighborhoods to rent.
During the 2008 housing crash, these entities were less prevalent. Airbnb was just getting started at the beginning of the crash.
Airbnb allows the average person to become a real estate investor. The housing market favors people who already own homes because they can leverage equity and payment history.
The government ruins it for everyone. When the government gets involved, things are bound to run amuck.
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The government wants to help by throwing helicopter money or raising interest rates, but these things usually have the opposite effect on the general population.
It is incredibly challenging to help Mainstreet (us) when we don’t take the time to learn things ourselves. If we depend on the government to save us from the investors, we are in a world of hurt.
Getting ahead of the power curve. If you are a renter, your life will steadily become worse. Most individual landlords are not even trying to be greedy.
For example, in 2023, my insurance on my primary residence went up $1,000 per year. That equates to an almost $100 per month increase in my mortgage.
If I were renting that home, I would pass this increase to the renter—insurance and property taxes force owners to raise rents.
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Large entities that own properties will raise rents without remorse. They will push their leases to the limit and not ask for forgiveness. Don’t expect investors to have sympathy for your situation.
You must take matters into your own hands to get ahead of the power curve. The only way to beat rental increases and eventually buy a home is to become an insider.
You need to capture exponential growth. Do you know the difference between linear and exponential growth?
Linear growth is when something grows by a set number, while exponential growth is when something grows by a percentage.
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Let’s say your rent is $2,000 monthly, and your landlord will raise the rent by $100 yearly. Your numbers look like this: $2,000, $2,100, $2,200, $2,300, $2,400, etc.
Let’s say your $2,000 rent will increase by 7% every year. Your numbers look like this: $2,000, $2,140, $2,289, $2,450, $2,621, etc.
Eventually, exponential growth will completely dwarf the linear growth chart. This is why the stock market handily beats putting your money in a savings account or bonds.
Your job gives you linear growth. The problem with most American households is that they are trying to live life through linear growth.
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For example, I spent 24 years living by an annual pay chart in the US Military. We would get 1-4% annual raises, depending on inflation.
These pay raises will not cut it in today’s exponential growth world. Trust me; investors, institutions, and REITs will raise rents by percentages (not linearly).
You need to capture exponential growth and take massive action. The most accessible way to experience exponential growth is by learning.
Learning is the key to exponential growth. Everything in the world compounds, whether good or bad. Therefore, we want to focus on building great habits that will compound into more greatness.
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This can be investing in the stock market every paycheck. Your dividend portfolio will eventually allow you to get ahead of the rental curve.
Becoming a content creator will allow you to capture exponential growth. You’ll get better and more proficient if you publish a five-minute YouTube video daily.
You can also start a small business, like a vending machine operation, an arcade, or a blog. As you learn the ropes, you can take on more responsibility and earn bigger profits.
It won’t be easy, but it’s not difficult either. Once you commit to your projects, you will begin to love seeing results.
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What you measure, you manage. If you track your spending, your spending habits will improve. If you record your dividends, you’ll continually earn more dividends.
Don’t expect your boss to have sympathy for your rising rents; chances are they are in the same boat.
Nobody is coming to save you; corporations owe you nothing. Corporations own your job and home, and these trends will only worsen.
The pension mindset. The pension mindset pushed Americans back hundreds of years. We became dependent on corporations (Ford) and governments (military) to care for our finances and health—for the rest of our lives.
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Then they pulled the rug from underneath us. That’s why we struggle to create exponential growth for ourselves.
Conclusion. Becoming an owner is the best way to defeat the pension (employee) mindset. You can own a rental room that produces income.
When rents rise, you can raise the rent of your room. You can take the income from your rental room business and invest it in income on the stock market.
Now you have two sources of income (income investing portfolio and rental room), plus your job. You have the tools in place to combat rising rents.
Every year your income should increase. My military pay, rents, dividends, and royalties increase yearly, ensuring I stay ahead of the power curve. What are you doing to capture exponential growth? Good Luck!
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