Six tips to help you get the right location for your property investment

exterior-houseLocation, location, location. Three small words that can transform your property investment decision, says Belvoir.

Belvoir Aberdeen’s advice for helping to decide the best location for a property investment includes:

1. Only decide on where you want to invest after thorough research.

2. Do not make a decision based on the look of the property alone. Just because it appeals to you, it will not necessarily be a good rental investment.

3. Providing tenants with a quality, well-maintained property for them to call home carries responsibilities. Only work with a local agent that you have checked out, trust and who has gained all the relevant professional industry accreditations.

4. Remember that big is not always best. A one or two-bedroom unfurnished apartment can often yield a better return than larger, four-bedroom furnished houses. It’s all down to location and the type of tenant you are targeting.

5. Overly high “yields” – or returns on an investment – can sometimes indicate hidden issues and may not necessarily lead to a good investment.

6. Beware of “buying cheap and paying dear”. If a property is located in a low-quality area it can increasingly become run down – attracting the wrong type of tenant and achieving poor long-term capital growth.


Property managers and tenants have new expectations about responsibilities

landlord-and-tenantIt used to be (and still is) that tenants renting an apartment could generally expect a clean unit with working appliances when they moved in, locksmith services for free and 24-hour emergency maintenance.

But if a tenant chose to rent a single-family house instead of an apartment, the arrangement was usually a little different. Landlord/owners might have owned only one or two houses and each owner offered a unique lease and felt responsible for none, some or most repairs and maintenance depending on how that individual saw the arrangement. That’s the observation of Vadim Kleyner, CEO of Brilion, Crowd Real Estate Investing, a locally based company.

“The general expectation was that tenants renting a single-family home were mostly on their own,” said Kleyner. “You had to buy and maintain your own appliances, and you did to the house whatever it needed for you to be able to stay in it.”

Then when the housing crisis began almost a decade ago, prices of houses plummeted and homeowners found themselves with foreclosed houses on their hands.

“When the crash came, way more inventory came on the market. Properties owned by displaced people were being bought up by investors in big numbers,” said Kleyner. “And there was no way the investors could handle the management of all those single-family homes all by themselves. So they hired property managers to find and place tenants in those houses.

“But the property managers changed the perception of single-family rental houses.

Many were professionals, and they expected investors to apply the same level of attention to the houses as they did the apartments,” said Kleyner. “They wanted to bring higher standards to the single-family rental.”

In time, Kleyner said the expectations of single-family house renters has also changed. More renters in this type of housing arrangement now expect the same things that apartment complex tenants have. That includes 24-hour maintenance and houses that are move-in ready. Kleyner, whose company is also involved with property management, hesitates to say whether this development is good or bad, but hints it is both.

“Some people are a little more high maintenance than others. Some tenants will say, ‘The light bulb needs to be changed. Can you send someone to change it?’

Of course we can’t do that. It’s clearly spelled out in the lease agreement what the responsibilities of the tenant and landlord are,” said Kleyner.

And then there is the question of insurance and liability and who should do the repair and maintenance work. Kleyner believes most property managers and property owners would rather have their own crews or choose licensed professionals do the work rather than have the tenant or someone the tenant selects. It’s also a safety issue. Would you want a tenant with no training and no license playing with the electrical?

“As landlords we would rather change our filters, maintain the hot water tanks and come out on an annual basis to clean out the gutters,” explained Kleyner. “We can’t really leave it up to the tenants because if they don’t do it, we are not prolonging the life of the house.”

Kleyner said the idea of a landlord being responsible for the majority care of a rental house wasn’t initially met with enthusiasm. But “now that they understand the pros,” it is accepted by many, even though it may cost more. Kleyner also said he does not pass that added expense onto tenants.

Kleyner said it is important for potential tenants to find out the quality of a property manager’s crews before they sign a lease. Ask how many crews are available for how many houses and how crews are screened, he suggested.

“With so much social media available, no one can fly under the radar anymore. Property managers have to be at the top of their game,” said Kleyner.

Angela Shuckahosee, executive director of the Cleveland Tenants Organization, also believes there are pros and cons having property managers involved with single-family rental houses. Shuckahosee sees property managers as being “accessible and responsive – meaning that a tenant can expect to know exactly who to call if something goes wrong and who to hold accountable.” And that’s a positive.

“(Otherwise it) can present problems if you have an unscrupulous landlord who is dodgy with communications,” said Shuckahosee.

“The con for the tenant is that a lot of (property management) companies follow blanket policy, such as late fees or evictions for non-payment. Sometimes these policies offer no latitude for the tenant if one-time help is needed, whereas the mom-and-pop landlord might be more willing or able to have a conversation about a payment arrangement,” said Shuckahosee.

Renters in the United States are getting older, according to Harvard University’s Joint Center for Housing Studies. Almost 51 percent of renters are 40 years old, which dissolves the argument that all renters are young. Single-family houses are also a growing share of the rental pie, according to the study. The increase in rental houses and the aging of renters may have additional influences on the uptick of property managers and single-family houses.


The Cleveland Tenant’s Organization lists these obligations on its website,”

Landlord Obligations:

  • Put and keep premises in a fit and habitable condition.
  • Keep the area safe and sanitary.
  • Comply with building, housing, health and safety codes.
  • Keep in good working order all electrical, plumbing, heating and ventilation systems and fixtures.
  • Maintain all appliances and equipment supplied by the landlord.
  • Provide running water and reasonable amounts of hot water and heat unless the hot water and heat are supplied by an installation that is under the exclusive control of the tenant and supplied by a direct public utility hook-up.
  • Provide garbage cans and arrange for trash removal if the landlord owns four or more residential units in the same building.
  • Give at least 24 hours notice, unless it is an emergency, before entering a tenant’s  unit and enter only at reasonable times and in a reasonable manner.
  • Evict the tenant when informed by a law enforcement officer of a drug activity by the tenant, a member of the tenant’s household, or a guest of the tenant occurring in or otherwise connected with the tenant’s premises.

Tenant Obligations: 

  • Keep the premises safe and sanitary.
  • Dispose of rubbish in the proper manner.
  • Keep the plumbing fixtures as clean as their condition permits.
  • Use electrical and plumbing fixtures properly.
  • Comply with housing, health and safety codes that apply to tenants.
  • Refrain from damaging the premises and keep guests from causing damage.
  • Maintain appliances supplied by the landlord in good working order.
  • Conduct yourself in a manner that does not disturb any neighbors and require guests to do the same.
  • Permit landlord to enter the dwelling unit if the request is reasonable and proper notice is given.
  • Comply with state or municipal drug laws in connection with the premises and require household members and guests to do likewise.

“(Property managers) wanted to bring higher standards to the single-family rental.” – Vadim Kleyner, CEO, Brelion, Crowd Real Estate Investing


Managing The Online Reputation Of Your Rental Property

online-rental-property-searchIn the age of social media and online rating sites, the majority of potential renters start searching for a place to live using some type of mobile device or desktop computer. By using popular rental sites or Google searches, they start narrowing the rental field without even seeing properties in person. This is why, as an owner of a rental property, you must be sure you are maximizing your rental property’s online profile and presentation.

Of course, you can do this on your own. You can take the time to encourage all renters to go online and rate you. You can play with search engine optimization (SEO) and make sure your online pictures are at the right resolutions. You can monitor comments and questions posted in public forums on the various social media platforms to address anything quickly.

Or you can make it easier on yourself by working with a property management company.

By getting your rental property under the care of the right property management company, you can ensure that the online reputation of your rental property will impress potential renters and, most importantly, that they’ll be able to find it in an Internet search.

But in considering which property management company will help you with your rental’s online reputation, you should first consider the company’s own online reputation.

Check to be sure that the management company has a solid reputation itself. Look at user-generated comments, such as Google reviews, to be sure that the company looks like one you want to work with.

When the management company has a good reputation, especially online, it will drive more prospective tenants to your property. Management companies with good reviews receive a lot of Internet-based inquiries and traffic. This means that you will get the best fit possible for your rental as the pool of potential tenants has widened.

A well-reputed management company will also bring in tenant referral agencies that will search the company’s properties and any online databases they manage. This widens the base of potential renters for you even more!

Another big reason why a management company with a good online reputation will help is that it keeps you from having to play the “search engine game.” Instead of spending time to make your property’s online listing optimal with the right search terms, your rental property can leverage the Google power a management company already has. A company that has good online reviews and more social media followers will be promoted by Google to Internet users first. Get your rental property folded into the management company and you can benefit big when it comes to online searches.

Honestly, it doesn’t take much for someone to find time to write a negative review, but when people are taking the time to leave positive reviews of a company, it means they were really impressed.

So if you see a property management company with an online reputation that glows, take note. It means it provides great customer service and takes care of the properties it manages, as well as keeps tenants happy.

Isn’t that the sort of company you want to work with?


Top 10 Tips for First-Time Landlords


Written by on March 22, 2016

I was once a first-time landlord but now I have over 10 years worth of experience investing in real estate and over 15 years of lending experience for real estate transactions.

During those years, I have seen and have personally made some serious mistakes, so I would now like to offer some landlord tips.

My hope is that this article will educate you so that you don’t make the same mistakes as I have. Here are my top 10 landlord tips.

1. Make Rent the Priority

Rent is your revenue. It’s amazing how many landlords are not aggressive in pursuing rent and late charges. It’s sometimes a good idea to work with people who generally need help … if they communicate with you.

But if your tenants just stop paying rent and ignoring your calls or texts, you need to start eviction proceedings. Otherwise, you could be six months behind on rent before you know it, which makes this probably the most important of all the landlord tips.

2. Partner With The Right Investor

I have an amazing business partner who is completely honest and transparent, two qualities that are absolutely critical when choosing business partners. For some reason, some new landlords are very willing to partner with somebody they barely know just because a deal looks good. This is usually a mistake.

I knew my business partner for over five years before we did a business transaction together.

Additionally, we have the same end-goals and values, which is what ultimately influenced my decision to invest in properties with him.

3. Screen Tenants Properly

Screening tenants is a really big deal, and I am the first to admit that I have made some serious mistakes in this area. My first multifamily tenant had a 480 credit score, couldn’t produce previous rent references, and didn’t have a job.

Take a wild guess as to how that ended-up? Let’s just say that anything under 600 is considered bad credit. If you wish to be more prudent, here is the breakdown:

  • Excellent credit — 750 and above
  • Good credit — 700 to 749
  • Fair credit — 650 to 699
  • Poor credit — 600 to 649
  • Bad credit — anything below 600

4. Don’t Allow Cats

Sorry if this is offensive to any cat lovers out there. I’m sure your cat is awesome. However, I’ve had a very bad experience with cats and will never forget it.

I renovated a property and was really excited about the new carpet I installed. I then rented the place to a manager of a local restaurant.

She paid on time for several months but then disappeared. She was relocated but didn’t tell anybody. She also “forgot” to bring her cat with her. The entire unit spelled like cat pee for several months, even after I installed new carpet. Lesson learned.

5. Don’t Ignore Extra Income Opportunities

Most investors think 1-1. What do I mean by that? If somebody buys a house, they simply rent the house out and that’s it. But that method means you could be ignoring several extra income ideas that could improve your property’s return on investment.

Here are some out-of-the-box ideas to think about for earning extra money:

  • Could you install solar panels? Look into selling back any excess energy generated to the grid.
  • Is there room on the property to install a billboard and/or cell phone tower?
  • Is there an unused shed that you could rent out for self-storage?

6. Know Fair Housing Laws

For some reason, many investors choose not to educate themselves on fair housing laws, and there can be serious implications if you violate them.

There’s no excuse to not educating yourself on the laws in the real estate industry. Landlordology has created several easy-to-follow guides on fair housing.

7. Don’t Invest in Renovations That Won’t Produce Higher Rent

One of my friends has made a lot of money in his current profession and is now buying rental properties using all cash. There is nothing wrong with this.

However, he is absolutely going over the top renovating these properties. For instance, he is buying properties in what I would characterize as “B” neighborhoods.

Then he renovates them by putting tile in the bathrooms, marble countertops in the kitchen, and crown-molding in the den. After renovating the properties, they are nicer than many owner-occupied homes.

The problem is that these renovations don’t lead to a high enough rent rate to justify the expenses.

8. Collect Rent Online

There is no reason for you to be collecting rent by a check in the mail. Not only is it time-consuming to go to your P.O. Box or mailbox, keep up with all the checks, and then deposit the checks, but it’s riskier.

The check can bounce, and then you’ll need to pay a non-sufficient funds fee and then contact your tenant for the rent and the NSF fee.

When you collect rent online, this whole process is negated, and the process is dead simple if you use Cozy.

9. Use the Right Financing Strategy

I have a little adage that I say every day to anyone who’ll listen: A good deal with the wrong financing strategy is a bad deal.

A good deal with the wrong financing strategy is a bad deal.CLICK TO TWEET

Most investors focus on the interest rate, but there’s a lot more to consider when financing rental property.

  • Is there a balloon payment?
  • How long is the amortization period?
  • Can there be an interest-only period when renovating the property?
  • Can we have a line of credit instead of a term loan?

Investors focus 99% of their time finding deals. When they get a deal, they then scramble to find financing. I have seen several friends lose good real estate deals because they didn’t have enough time to put their financing in place. Be just as proactive about financing rental property as you are about finding deals.

10. Market Rental Properties Effectively

It’s amazing to me how many real estate investors still advertise in the newspaper and use yard signs. From my experience (12 years now) potential tenants who call you and pretend to be interested in your property are just nosy neighbors.

Using an online resource like Cozy to market your listing is great because tenants can view pictures of inside the property and get valuable information about the property without bothering you.

This saves you an incredible amount of time.


Peter Drucker famously said:

“What gets measured gets improved.”

Perhaps the biggest mistakes I see landlords making is that they aren’t organized, and they don’t keep proper records of revenue and expenses. So I couldn’t leave being organized out of a guide on landlord tips.

If you don’t keep proper records of revenue and expenses you have absolutely no idea how profitable your property is.

Source: Landlordology

Sure, Renters Aspire to Own Homes-but See Renting as Better for Now

lease_renegotiation1Renters these days are caught in the housing market’s ultimate Catch-22: The cost of renting is skyrocketing, but they can’t afford to buy, either. In a word, they’re stuck. So a majority are choosing to defer the dream of homeownership, a Freddie Mac surveyfinds.

This is not a shocker.

Even though rents in many parts of the country are taking a bigger and bigger bite out of their paychecks, about 70% of renters say that leasing a home or apartment is still a hell of a lot more affordable than buying one, according to the survey. And more than half say they will continue to make monthly payments to their landlords over the next three years.

The survey of more than 4,000 adults, including 1,527 renters, was conducted from Jan. 26 through Feb. 1.

“While most renters still have favorable views toward homeownership and aspire to it, many choose to rent because they view it as more affordable and a better fit for their lifestyle right now,” says David Brickman, executive vice president of Freddie Mac Multifamily.

Older millennials (ages 25 to 34) are most likely to buy a home in the next three years, with 56% saying they plan to do so. They were followed by members of Generation X, at 49%; younger millennials (ages 18–24), at 44%; and baby boomers, at 31%.

For those who make the big move to shell out for a home in the next three years, the biggest roadblock is coming up with the cold hard moola for a down payment. That’s what 36% of respondents say, while 35% report that less-than-stellar credit is standing in their way. Not making enough money and having too much debt are also concerns.

About 37% of U.S. households, or 43 million, were renting in 2015, according to a Joint Center for Housing Studies of Harvard University report.

Nearly half of them—21.3 million—spent more than 30% of their earnings on housing in 2014. Meanwhile, 11.4 million had to divert more than half of their paychecks to rent each month.

Different generations have different reasons for preferring renting. Millennials like that renting allows them to stash more money in the bank while accommodating their lifestyles. Generation Xers and boomers say they don’t have to worry about the maintenance or responsibility of owning a home. Boomers also say renting is a better fit for their lifestyle.

And despite what can seem like a never-ending barrage of bank account–draining hikes, renters won’t be deterred.

“Almost half of all renters whose rent rose in the last two years say they like where they live and will stay regardless of rent increases,” Brickman said in a statement.


Tax Tips for Rental Property Owners

1031It’s tax season again. If you own a rental property, your tax strategy is more complex than for the home you live in. Here are some important tax tips for rental property owners.

Rental property tax considerations each year

Here are some points to keep in mind when you file your annual return:

  • Your rental property shows up on Schedule E of your tax returns, which logs rental income and expenses. The expenses include mortgage interest, property tax, maintenance, repairs, utilities, property management fees, depreciation, and all other costs associated with owning the property.
  • If you pay points when you close your rental property purchase loan, you cannot fully deduct them the year they were paid like on a primary residence purchase. Instead, you must deduct points over the life of your loan.
  • If your rental income exceeds expenses each year, the income is taxable just like any other income.
  • If expenses exceed rental income on Schedule E — which is common because of the depreciationexpense line item — you can deduct rental losses if your non-property income is up to $150,000 per year. If your non-property income is up to $100,000, you may be able to deduct rental property losses up to $25,000 annually. If you earn between $100,000 and $150,000, this potential deduction benefit is cut in half. And if you earn above $150,000, you cannot deduct rental property losses.
  • If you earn too much to deduct rental property losses, the losses can accrue as an offset to capital gains taxes when you sell.
  • Ask your tax adviser whether deductions or accrual of rental losses fits your tax profile.

Rental property tax considerations when you sell

When you sell a rental property, you will pay capital gains taxes on your appreciation. You must consult a tax adviser to get accurate figures, but here’s a simplified formula for estimating capital gains taxes and net profit on a sale.

Subtract purchase price, cost of improvements you made, and total selling cost (including realtor, title, and local tax fees) from sales price. The resulting number is your capital gain, and you’ll pay federal and state taxes of about 25 to 30 percent (based on your tax profile) on the capital gains.

Let’s see what this formula looks like if you bought a home eight years ago for $200,000 using 20 percent down and a 30-year fixed rate of 6 percent (the rate at the time). A quick mortgage calculator analysis tells us that your balance is now $140,435.

Suppose you made $10,000 in improvements to the home along the way, you earn less than $100,000 per year (so you didn’t accrue any rental losses to offset capital gains), and you’re now selling the property for $300,000. In a county that has a total of 7-percent selling cost (including real estate agent commission, transfer taxes, title, and settlement fees), your estimated capital gains would be about $69,000.

Using the capital gains tax formula above, you’d have about $17,250 to $20,700 in taxes due, and you’d therefore net about $117,865 to $121,315 on the sale.

How to avoid capital gains taxes on rental property

You can avoid this tax hit if your intent is to buy a new rental home immediately after you sell.

You do so with an IRS benefit called a 1031 Exchange, which is named after the IRS code number. This allows you to defer paying the capital gains taxes at closing as long as you identify a new rental property to buy (in writing) within 45 days, and close the new purchase within 180 days of closing your sale.

To get the full tax benefit, the new purchase must be of the same or greater than your sales price, and you must put every penny of net proceeds from the sale into the new purchase.

A 1031 Exchange defers rather than eliminates the tax hit in your sale.

If you plan to convert the new rental property to a primary residence at some point in the future after the exchange, the IRS has no specific rules prohibiting you from doing so. If this is your strategy long term, consult your tax adviser on capital gains tax implications before you enter into your exchange.


Owning Rental Properties In A College Town

college-roommatesHaving a rental property that’s attractive to college students is a good thing. By having a college-accessible rental property, you are guaranteeing a long line of potential tenants. As long as there is a university, students will need nearby housing.

Of course, there are some things to keep in mind if you own rental property in a college town:

  1. Set your price appropriately. There is demand by college students but if your price is too high, your house won’t rent. By considering the tuition price the average college student in your town pays, you can easily gauge the amount of rent you can ask for.
  2. Make sure the property is free of repairs and all is in working order. Not only is it the law, but you will hear about it from the parents or cosigners if the property isn’t in working order. When you offer better property conditions to renters, you can generally expect to obtain better set tenants.
  3. Have the right lease. Leases governing college students should always have clauses about noise control, maximum occupancy (check local code), and damage and repair recourse. Be sure that your lease begins and ends at the right time of year, taking in to account that summers are the time for turnover. Remember that any situations that arise when renting to college students usually evolve from a lack of experience on the renter’s side. Think of the lease as a first lesson in renting: Clearly establish all expectations.
  4. Make the lease thorough. Things you wouldn’t think need to be explained, explain! Mention anything you think is important and consider clauses limiting candles, weapons (including BB guns), painting the walls, loud noises after midnight, and the like. Be explicit.
  5. Require a cosigner and make cosigners responsible for all parties. With college kids, their parent may be helping to fund their college experience. In most cases, parents are willing to cosign for leases. Minors can’t sign a lease without a cosigner, but requiring one even if the tenant is of-age is strongly recommended. By making the cosigners equally responsible, there will be a concerted effort by all involved to minimize damages and pay rent.
  6. Screen your renters diligently. Check the actual renters’ past rental history, ensure the cosigners are aware of all the rules moving forward, and perform a credit check. The more information you have, the better you’ll be able to make good decisions. Don’t ever just trust your instincts on this one.
  7. Make your renters pay the bills. College kids are quite capable of setting up all utilities and paying for them. This should be a requirement of your rental property. If college kids want to spend more than $100 each month on TV packages and Internet access, let them see and absorb those bills. The only exception is to include lawn care if you are offering a home with a larger yard or a lot of shrubs. Most students are too busy to look after these items the way you would want.
  8. Use a third-party management company. A property manager will know all the laws and have the proper paperwork to navigate a tenant experience. A third-party management company will be able to effectively handle communication between all parties. You can save yourself a lot of headaches by using a professional while enjoying the benefits of renting to the college market!


Tenant Vacated Without Paying Utilities

ask-the-attorneyThe Landlord Protection Agency® presents John Reno, Esq., a highly experienced Landlord – Tenant attorney based on Long Island, NY.

Q:  Dear Mr. Reno:
We recently found out that our former tenant moved out, and did not pay any of their utility bills. They have now left us with a bill of over 600.00+ dollars. We also found out they were withholding the copy of the bill in our name from the utility company. This copy was sent to their address, but they should have given it to us, as it said COPY, and was in our name. They also received their own bill, and knew they were required to pay utilities as part of the rental contract. This 600.00+ dollars will now fall back on our taxes since we own the home. Can you advise me in next steps for collecting this debt, or turning this is to a credit reporting bureau?? Thank YOU! Kind Regards, Cheryl H.

A: STEP ONE: It’s a small claims case. You can file that on your own. Use the premises as their last known address if you don’t know the new one. STEP TWO: After you get your judgment- then it’s a collection case. That’s when you leave this eviction website and find a “collection” website. You may want to see The LPA’s Credit Bureau Reporting page.

How to Calculate the Future Value of Real Estate Investments

stacks-of-money-cashThere are a couple of major financial considerations when making a real estate investment. First, you want to estimate the property’s potential to generate rental income, which can usually be done by evaluating the rental histories of similar properties nearby.

It can also be useful to estimate what the property might be worth in the future. For instance, if a rental property barely breaks even on rental income, but you project that you’ll be able to sell it at a nice profit later; it still may be worth considering. With this in mind, here’s how to calculate future value of real estate, and how to use this information.

Calculating the potential future value of real estate. First, you’ll need to determine your projected growth rate. Real estate has historically appreciated at a rate of between 3% and 5% per year, depending on the price index you’re looking at. The U.S. House Price Index shows that prices have risen at 3.4% per year on average since 1991, so we’ll use that to illustrate our calculations. For the purposes of our calculation, you’ll need to convert this to a decimal, or 0.034.

To calculate the expected future value based on your growth rate, add one to the rate, and raise this to a power equal to the number of years you’re looking at. As a mathematical formula:


Finally, multiply this future growth factor by the current value of the property.


An example. For example, let’s say that you buy an investment property worth $200,000, and you’d like to estimate what its value will be in 10 years. Using our 3.4% average rate, we can calculate the future growth factor as follows:


Multiplying this factor by the current value of $200,000 gives us the potential future value of the property.


Take this with a grain of salt. While historical averages for investment performance tend to be pretty reliable over long time periods, keep in mind that nobody has a crystal ball that can tell us an accurate projection of real estate values over the coming years. Sure, the long-term average is about 3.4%, but this includes the period from 2000 to 2006, when home prices grew more than 10% per year, and also includes the 2007 to 2012 period where prices dropped by more than 5% per year.

The point is that estimating the future value of a real estate investment can be a useful part of determining your profit potential, but by no means should you expect the property to be worth exactly this amount.


It’s a Great Time to Be a Landlord

houses money stackIt’s an excellent time to be a landlord. Amid a U.S. recovery that has been frustratingly slow for most folks, property owners’ share of the economic pie has grown larger than at any point in the past seven decades.

As just about anyone renting in a major U.S. city can attest, the past 10 years have produced a brutal squeeze in the property market. The subprime bust, stricter mortgage requirements, marriage-delaying millennials and weak income growth have added millions to the ranks of renters. Meanwhile, restrictive zoning laws and a lack of low-income housing construction have kept supply from keeping pace.

The result has been a bonanza for anyone lucky enough to own rental property. According to the latest data from the Federal Reserve, property owners’ rental income — a number that includes the estimated benefit they gain from homes they occupy — added up to $168 billion in the last three months of 2015, or about 4.3 percent of U.S. national income. That’s up from just 1.5 percent at the beginning of 2007, and the highest level going back to 1946. Here’s a chart:


Great as this may be for landlords, it presents a problem for social cohesion and the broader economy by contributing to wealth inequality. The higher rental income goes, the more money gets transferred from poorer people, who typically rent, to wealthier people, who tend to own. Indeed, as the Massachusetts Institute of Technology doctoral candidate Matthew Rognlie has noted, housing wealth has driven the increase in the capital share of income that the French economist Thomas Piketty made famous in his book “Capital in the Twenty-First Century.”

What, then, to do? As my Bloomberg colleague Justin Fox has noted, easing regulatory constraints on housing could go a long way — with the added benefit of boosting the economy. Programs aimed at poorer families, such as federal rental assistance programs, can also help. Probably the best solution may be the most elusive — growth that would give more people the incomes needed to afford homeownership.