2012 Investing Trends: Changing Real Estate Rental Dynamics

With the New Year, investors are scurrying to cover their tax losses, and figure out what will be relevant in 2012. Having done the math on a number of option pieces from around the web, I’ve put together a list of my favourite investing trends for 2012.

Each day I’ll go into detail about a new investment trend that will be relevant for the New Year, and include a method for taking advantage of the trend. Today, I’ll start off by discussing the opportunities associated with changing housing trends.
One of the most pervasive forces in the US markets right now is the housing market. Given that much of this financial melt-down can be attributed to a full blown mortgage crisis, it is no surprise that many people who lost their homes in foreclosures are now turning to renting. Given that the crisis was so pervasive, the results have been fairly dramatic.

Rental vacancies have been increasing dramatically, and even though apartment companies have been building new complexes en-masse, the surge in demand has kept rent prices high. The end result? Apartment complexes are full of tenants, and collecting big rental cheques. If you’re reading this as a renter, you’ll have no trouble agreeing.
Given this trend, we have two options for investing into the rental housing trend. The first option involves investing in companies that are actively building rental locations, either for their own distribution, or on contract for another company. This would take advantage of the fact that the increase was somewhat unexpected, but also assumes that there will  be more unexpected increases in demand in the future, requiring additional apartment buildings to be made.

Alternatively, you might be better off investing in real estate income trusts (REITs). A REIT provides you with regular income that is generated from the rent from the apartment units themselves. This means that you’ll continue to collect income so long as the company either continues to keep the current occupancy levels, or increases those levels.

The end result is that your returns are no longer tied to unexpected growth in the equity, but simply the yield that will consistently arrive from rental cheques. Essentially, it puts you in the position of being a land-lord, without having to worry about the tenants.