by Phoebe Chongchua

Millions of foreclosures have turned former homeowners into renters. In fact, there’s been a nearly 34 percent increase in rentals over the last decade, according to a USA Today analysis of U.S. Census data. That means that in 2010, nearly 35 percent of occupied homes were rented.

According to USA Today, 25 cities including Baltimore, Minneapolis, Salt Lake City and Sacramento went from having more than half homeowners in 2000 to majorities of renters in 2010.

The data looked at more than 500 midsize and large cities. Significant jumps in the renter-occupied versus the owner-occupied homes occurred in Irvine, California (from about 40 percent occupied rented homes to 49.8 percent between 2000 to 2010). During that same period Philadelphia increased from 40.7 percent to 45.9 percent and Birmingham, Alabama, saw a nearly 5 percent increase to reach 50.7 percent. Baltimore, Minneapolis, Sacramento, and Salt Lake City saw major shifts from owner-occupied to renter-occupied.

If you’re becoming a landlord for the first time by choice (investment property) or because you can’t sell your home now, here are a few tips to consider.

Understand how debt affects your ability to qualify for a loan. First, if you’re just getting started and are looking to purchase a property to later rent, consider that Freddie Mac guidelines typically require a maximum debt-to-income ratio of 45 percent.

Be prepared to put more money down. Owner-occupied properties have the advantage of requiring a smaller down-payment than investor mortgages which sometimes require as much as 40 percent. Also keep in mind that when buying a property for investment purposes, the down payment and/or the closing costs cannot be from gift money.

Know your market and ability to rent your property. Overall rental growth is increasing while homeownership is declining. According to the Census data, The number of renter households has grown, on average, by nearly 700,000 a year since the housing peak in 2006 and the number of owner households is shrinking, on average, by just over 200,000 a year. This could be good news if you’re planning to rent your home. But supply and demand are key. So study your particular rental market carefully. before you buy or place your home for rent.

Rents may rise if the market doesn’t get too saturated. As more homeowners (who have the ability to) decide to hang on to their homes and list them for rent instead of for sale, they’re finding that it can be beneficial for them. While homeownership has declined for six consecutive years, the rental market is one of the few sectors to benefit. But how long that will last is uncertain. With the increasing number of foreclosures, the rental market is becoming saturated. In some areas, that’s causing rental properties to sit on the market just like other for-sale properties.

However, some other experts still say that there will be a boost in rental growth for at least the next couple of years due to foreclosures, housing prices being uncertain and causing people to wait to buy, and government homeownership subsidies being cut.

Know when to reduce rent. Experts advise that if a rental home is listed for longer than about 30 to 45 days, it might be time to reduce the rent. Also, keep in mind that rental properties are just like other for-sale properties, needing to be kept in good condition and have their upgraded amenities showcased. Use a real estate agent to help you highlight your property and get it rented quickly.

Owning a home still preferred. Regardless of the growth in renters, the idea of homeownership is still the American dream; 74 percent of renters think owning is superior to renting, according to a recent survey by mortgage giant Fannie Mae.

Copyright © 2011 Realty Times. All Rights Reserved.

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