ON TREND High Rent Climate

by Inlanta Mortgage

High Rent Climate

Leveraging a Rising Rate

GRAND RAPIDS IS POISED to continue its growth as a cosmopolitan city that’s attractive to companies that bring jobs and professionals to the beating heart of Michigan. Housing starts have been slow due to supply chain logistics, while the resale housing inventory remains critically tight, creating occupancy pressure and rising rents in the rental sector.

Grand Rapids ranked among the top 20 most competitive renter's markets in the nation, with 97 percent occupancy, according to Rent Café. Nationally, rents rose by more than 10 percent last year. Grand Rapids is one of the top 30 cities nationally in which to own a rental property, according to Roofstock.com.

While the rising rents reported in local media over the last few months pose a problem for affordability, it also allows those with fluidity to diversify their portfolios. With a sufficient strategy, there are savvy ways you can build wealth despite rising interest rates, waning stock market returns and a decidedly tight real estate market.

Strategy 1: The Vacay Home Shuffle

In the current climate, purchasing a second home is not dissimilar to buying an investment property. In some scenarios, a vacation home turned parttime rental can bring the best of both worlds. Housing continues to appreciate at a rate that outpaces the stock market, and West Michigan continues to be a popular tourist destination. While rates are approaching levels not seen in the last few decades, they’re still historically low. What was the average interest rate in the ’80s? 12.7 percent. The ’90s? 8.12 percent. The 2000s? 6.29 percent! So, if a vacation home suits your lifestyle, don’t let rising rates scuttle a solid financial strategy.

Strategy 2: Trade Up Your Primary – But Keep Your Original Home

Another strategy is to go ahead and buy that dream home you’ve desired – if you can find it! You can win your bid with a rock-solid preapproval and vetting your strategy with a local pro. While the current rate hike means you will pay about $115 more per month per $100K mortgaged with a 30-year term, you can easily make that up by retaining and renting out your existing home. Then you have two appreciating assets that should prove future-proof, given the growth climate and housing outlook for West Michigan. As a bonus, you avoid capital gains, and it may be an excellent time to put the original home in a family trust.

Strategy 3: Recover the College Fund – Buy a Student Residence

If you have college-age kids and a fund that’s been taking a hit in the stock market, you might be able to recover some of your losses and ultimately save on the cost of college by investing in a campus rental property. Work with a strategic lender to discuss the ins and outs of this strategy. The upside is that you could also be helping launch Junior by requiring some sweat equity and creating a future revenue source to pass down. Remember that Junior will face those high rents when they graduate. They’ll get an A-plus start in life if they graduate with an economic rent and a revenue source!

Strategy 4: Run with the Big Dogs – Become a Real Investor

On a national scale, Greater Grand Rapids has attractively low (but quickly appreciating) home values combined with a vibrant economic trajectory; this has not escaped investors' notice from afar. But YOU have something they don’t – a local network and intimate knowledge of the lay of the land. You’re well-positioned to put that local savvy to work for you by identifying up and coming neighborhoods, understanding the nuance, and possibly knowing about a coming listing before it hits MLS through social media and your network.

These are just a few ways you can leverage current conditions to diversify your portfolio and build wealth to future-proof your lifestyle.

Jonathan Arnold Branch manager at the Ada office of Inlanta Mortgage NMLS# 1016. Connect with him at MoveUpMi.com. Jonathan is also licensed in Florida – learn more at FloridaHomeLoanSolutions.com