What A Strong Rental Market Means for Real Estate Prices

We all hate when the rent increases on us. Generally when this happens we have three choices:

  1. Roll with it. Sign that lease.
  2. Find a place that's cheaper and move.
  3. Decide that renting is no longer for you and that it's finally time to buy.

If you haven't noticed, rents continue to climb across the city. Brooklyn rents have increased to record highs, and Queens isn't far behind. Once upon a time, people could move to the outer boroughs for a deal. That's not always the case these days.

The challenge for would-be homebuyers is that the strength of the rental market can often be an indication of the strength of the sales market. The higher rents are, the more expensive sales prices are.

Why is this generally the case? Take an investment property for instance. Somebody wants to buy a property that has increased its rental income by 15% on an annual basis over the past 2 years. Sales prices would flow in a similar direction. If they didn't, the property would be considered incredibly undervalued.

The lesson from this is simple. Don't wait until you can no longer afford the rent. Instead, search for a purchasing opportunity when you believe that rents will continue to increase. This will give you a jump on the market and enable you to capture massive upside.