Insights into the Rental Market: Trends, Insurance, and Investment Strategies

The rental market is currently experiencing a period of bifurcation, with performance varying significantly by region and rental type, according to Charles Goodwin, VP of Bridge and DSCR Lending at Kiavi. The apartment sector, despite a record number of construction starts during the COVID era, is beginning to see stabilization as the wave of new deliveries gets absorbed. Meanwhile, single-family rentals (SFR), build-to-rent (BTR), and apartments are outperforming the for-sale market, which has slowed due to increasing inventory. Goodwin highlights the Midwest as a standout region due to its limited new construction during the pandemic, resulting in strong rent performance and stable returns for investors.

Goodwin also addresses the importance of insurance for real estate investors, emphasizing the need for property, liability, and loss of rent coverage. He advises investors to secure coverage well in advance of closing to avoid delays, especially during high-risk seasons. For those considering out-of-state investments, Goodwin recommends focusing on job growth, rental supply, and market fundamentals, while stressing the importance of having trusted local partners to navigate regulatory and logistical challenges.

Regarding investment strategies, Goodwin affirms the effectiveness of the BRRRR (Buy, Renovate, Rent, Refinance, Repeat) strategy in today's market, provided investors use the right financing. He suggests starting with a short-term bridge loan for purchase and renovation, then refinancing into a DSCR loan once the property is stabilized. This approach can enhance cash-on-cash returns and provide flexibility for future deals.

In conclusion, Goodwin advises investors to focus on fundamentals, build strong seller relationships, and prepare financing and insurance in advance. With homeowners in strong equity positions, the anticipated foreclosure wave is unlikely, making strategic preparation key to success in the current real estate environment.