Is a Rental Property a Good Investment in 2024? Everything To Know

The last few years have been quite a ride for the real estate investment market and 2023 was no exception. First there was the historically-low interest rates, skyrocketing rents and massive appreciation gains. Then homeowners were greeted with rising interest rates, high inflation and constant speculation of a recession.

If your head is spinning, you’re not alone. But bottom line: is rental property still a good investment in 2024?

To find out the potential risks and rewards of the rental market in 2024, Belong compiled research and analysis on the current rental property market from a variety of sources and Belong's own internal insights. This took place between June and November 2023 and is subject to change.

Discover Belong PRO: Take the guesswork out of your cash flow with guaranteed rent, 24/7 support and more by joining the Belong network. 

What are the potential rewards in the real estate market in 2024?

The U.S. doesn't have one 'housing market', but rather many housing markets within every locality. A good buy in Seattle isn't the same as a good buy in Salt Lake City. Some cities have consistent demand, others will go through fluctuations based on supply and demand.

So is buying a new investment property a good idea in 2024? The answer will always depend on your personal situation and the properties you're considering. That said, here is a list of 6 potential rewards or 'pros' of investing in the real estate market in 2024. 

1. Rental homes can hedge against inflation

When inflation rises, so do rents. Real estate investments are often described as a "hedge against inflation." This is because with a fixed-rate mortgage, interest payments will stay the same but your rental income can increase over time. You'll also be building equity in the home and can benefit from inflation and appreciation long-term. 

2. Property values have a history of increasing after economic downturns

Housing appreciation has skyrocketed in recent years, with double-digit gains on the value of most homes. Of course, there's always the risk of an economic downturn that could change that quickly. Thankfully, property values have a history of bouncing back and increasing after economic downturns. That means if you're investing for the long term, you can expect the value of your property to rise over time — even if there's a risk of values declining in the short term. 

3. Single-family homes are less volatile than the stock market

According to data from Roofstock, average annual returns on single-family homes in the rental market are comparable to stock market returns and outperform bond returns, but with considerably less volatility. They also report that there's no correlation between single-family homes and the stock market as an investment, meaning that real estate can be a good way to diversify a portfolio. 

Like the stock market, real estate investing requires careful planning and knowledge to maximize returns. Many first-time investors face a learning curve, but there’s an opportunity to learn what works for your personal finance goals and build on it. Our Belong PRO team specialize in working with first-time rental owners, so if you’re just starting out or have inherited a home, we can simplify your journey and financial success.  

Learn More: What Should I Know Before Renting Out My House For The First Time?

4. Low affordability is fuelling rental demand

Even as house prices slow across many markets, they're far from affordable for many Americans. CNBC reported that even with pricing slumps in some markets across 2023, a number of research firms predict that home prices will keep rising in 2024. This is simply because there aren’t enough homes to meet demand. 

People will always need a place to live and as fewer Americans are able to buy their own homes, good rental investments in the right neighborhoods can continue to attract long-term residents with low vacancy rates. 

Learn More: Belong Expands to New Markets, Giving More Americans a Place to Belong

5. Rental expenses come with tax write-offs and benefits 

Tax write-offs are a major perk of owning a rental property. The IRS outlines rental expenses you may be able to deduct on your tax return including mortgage interest, property tax, and operating expenses including property management fees, depreciation, and repairs. You can even deduct the cost of hiring an accountant or tax professional to maximize your claim. 

Learn More: The Ultimate Tax Prep Guide for Landlords

6. Technology is making it easier than ever to manage a rental property

For the longest time, there’s only ever been two options for managing a rental property: do it yourself (which is a lot of hard work), or hire a property manager (which can come with its own challenges). 

But after lagging behind, technology is finally finding its place to revolutionize how rental homes are managed. Because the real opportunity that modern tech presents is the chance to completely rewrite the rental experience. 

Belong does exactly that, combining industry-busting technology with human smarts to make renting lovable for both homeowners and their residents. From guaranteed rent and 24/7 customer service to innovative financial solutions, we’re flipping old school property management on its head. Learn more here. 

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What are the potential risks in the real estate market in 2024?

Now that we've covered the potential rewards, what are the risks of investing in a rental property in 2024? Again, this will vary depending on your personal situation and the locality where you want to invest. But here is a list of 6 risk factors that you should consider before buying a rental property in 2024. 

1. Not all real estate investments create passive income

Owning rental properties isn't always a passive investment. If you're managing the property and finding renters yourself, you'll be spending a lot of time communicating with tenants, hiring (increasingly expensive) maintenance workers to fix issues, and finding new tenants every time renters decide to move out. 

Many first-time landlords say it's a second part-time job they never anticipated. Do your homework and find out the real time-cost of property management and consider if you need to outsource the work.

2. Low inventory is making it more difficult to find good investment options

When demand is hot, many cities become seller’s markets. If you already own a rental property, you’re sitting pretty. But if you’re looking to break into the market, the increase in competition will make it harder on your rental cash flow in the short term. 

3. Interest rates are tipped to remain high

House prices are already high, so an interest rate above 7% can make it hard to finance a rental property investment. Is there any relief in sight in 2024? Maybe, but not until the second-half of the year, according to a CBS Money Watch report. 

Like 2023, this means that unless you have decent capital for a large deposit, buying an investment property in 2024 is going to cost more than in previous years. Renting out a home with a mortgage? Read this first.

4. Rental growth has slowed and may decline in some areas

Location in real estate is always important. But it becomes more so when vacancy rates rise or values drop. Choosing the wrong neighborhood in 2024 could create major challenges, including lower rental income and property values than other markets and a smaller pool of quality tenants to rent to.

According to Zillow in November 2023, rents are still rising but as they stabilize, renters are getting more concessions now than they did in the past few years to sweeten the deal. In 2024, you will need to ensure pricing is accurate and that your house is in top, move-in ready shape to attract the best price and not rely too heavily on the massive rent bumps of recent years. 

Learn More: 6 Ways to Improve Your Rental Listing Price and ROI with Belong

5. Maintenance costs are heavily inflated

Even if you own your rental, you won’t be immune to rising costs. Home maintenance costs have hit an all time high, with materials and labor being heavily impacted by inflation. 

A report from Thumbtack found that the average annual cost of maintenance on a single-family home rose in 2023 to $6,409 — up $521 from April 2022. For some localities such as Florida, where extreme weather conditions pose a risk of damage to homes, repair and maintenance costs have spiked as high as 39%. This is an important calculation to include in any cash flow analysis of any rental investment. 

6. There's still a threat of an economic downturn in 2024

Is the U.S. economy heading for a recession? This is the big question that's been asked since 2022 and while many economists have stopped sweating it, there’s still no definitive answer for 2024 and beyond.  

If the U.S. does face an economic downturn, there will be a risk to house prices and rental growth. That said, people will always need a place to live and as mentioned earlier, prices can and do bounce back. It makes researching your first investment home and location all the more important to look at markets that haven’t been recently overpriced.

Reach your financial goals with guaranteed rent

Belong is simplifying the rental experience and helping more homeowners reach their financial goals through real estate. Tell us about your rental home now to get started.

You can also visit our homeowner's page to learn more about how our modern, tech-enabled services are helping people ditch property management in cities across the US including Austin, San Antonio, Tampa, Raleigh/Durham, Dallas/Fort Worth, Houston, Miami and more. 

Disclaimer: It’s important to consult with a professional and consider your personal financial situation, local microeconomic factors and other risk factors before choosing to invest in real estate. This article should not be considered financial advice. To find out the potential risks and rewards of the rental market in 2024, Belong compiled research and analysis on the current rental property market from a variety of sources. These include Investopedia, Roofstock, Zillow, Thumbtack, Forbes Advisor, CBS News, CNBC, Money, and Belong's own internal insights. The research took place between June and November 2023 and is subject to change.