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| | | Saturday, October 1, 2016 | |
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Chart of the Week:
The Best Way to Play Today's Red-Hot Rental Market Bob Creed, Financial Research Associate, The Oxford Club
The American Dream of homeownership is fading among millennials.
Unlike their parents, they show little interest in setting down roots. Instead, they enjoy the freedom and mobility that comes with home rental.
It's a trend that's been gaining momentum for years. And it can put big money into the pockets of investors who know how to play it.
I'll get to that in a moment...
First, let's look at this week's chart. It shows the U.S. homeownership rate.
As you can see, there's been a steady decline over the past decade. It now sits at 62.9%. This is the lowest rate since the census began tracking the quarterly figure in 1965.
And folks age 18 to 34 are a big reason for the drop. Their rate of homeownership recently fell to its lowest in history... 34.1%.
But with mortgage rates near all-time lows, why are the majority of millennials in the rental market instead of buying homes?
Besides obvious reasons like affordability and fewer available starter homes, they're also faced with hurdles that didn't affect past generations.
A big one is student debt.
College grads spend nearly one-fifth (18%) of their salaries on student loan payments.
That debt makes it harder for millennials to save for a down payment and afford the other costs of owning a home.
But the bigger question is: Do they really want to buy?
The answer is "no."
Millennials are delaying marriage and parenthood, the primary drivers of homeownership, until later in life.
And instead, they're focused on finding the best property to rent.
Since new apartment complexes deliver luxurious amenities like pools, gyms and private theaters, it's easy to understand why.
But what does this trend mean for investors?
It means rental properties are fast becoming a great opportunity.
But you don't have to go out and buy a rental property. There's an easier - and cheaper - way to cash in on this growing trend.
By owning shares of residential rental real estate investment trusts (REITs), you can profit from this trend and collect outsized dividends.
Two of the best REITs to consider are AvalonBay Communities (NYSE: AVB) and Camden Property Trust (NYSE: CPT).
Over the last two years, both have had strong returns of 30.17% and 27.73% respectively. They also pay nice quarterly dividends - with current yields of 2.99% and 3.49%.
If you're looking for more exposure to the whole sector, a REIT ETF with residential rental exposure can help you cash in on the rental trend.
IShares Residential Real Estate Capped ETF (NYSE: REZ) is the closest thing to a residential rental REIT pure play as you'll find. Over the last two years, the fund is up 30.77%. It also pays a quarterly dividend with a current yield of 3.80%.
While millennials are enjoying all those great rental amenities, you can sit back and enjoy the profits.
And if you know someone who lives in a luxury complex, try to get an invite. You will quickly see why the American Dream is fading. | |
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How John D. Rockefeller Became the Richest Man in the World...
 At an estimated $300 billion, John D. Rockefeller was three times richer than Bill Gates and four times richer than Warren Buffett. He did it by "monopolizing" every link in the oil chain, until the government broke his company apart.
Most people know that story, but you likely don't know the one company Rockefeller founded that quietly continued his business plan...
It's still in operation today. In fact, it's increased its royalties every year on record. And just days from now, it's set to pay out $583 million in royalties.
Here's how you can collect. | |
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Alex's column a week ago about the Wells Fargo accounts scandal generated more responses than any Investment U column he's written this year. Read On... | |
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Financial markets showed distinct debate reactions. This gives us an idea of who officially won Monday night's showdown - at least in the eyes of investors. Read On... | |
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This year isn't like a "regular" year... This is an election year. So, what does that mean for the next couple of months? Read On... | |
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The Oxford Club is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that although our track record is highly rated by an independent analysis and has been legally reviewed, investment markets have inherent risks and there can be no guarantee of future profits. The stated returns may also include option trades. 
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