The Market Is Now Primed For Investing In Real Estate
With the economy in a scrum, the stock market sinking, and cryptocurrency in freefall, you might be questioning where the best place is to invest your hard-earned money. Well, look no further than the red-hot rental real estate market.
Now has never been a better time to buy real estate! Experts agree that real estate is the perfect investment to hedge against inflationary pressures and can offer tremendous returns on investment.
Despite fears of a potential recession, real estate has been categorized as a generally safe investment and can offer diversification to any investment portfolio. But diversification is only just one benefit that real estate can provide.
Given the current rate environment and home price trends, there is a lot of room to cash in on new real estate opportunities. While some real estate investors may only see cash flow as a means of return on their investment, it’s not everything.
In fact, there are other benefits worth more of your focus including appreciation, debt reduction, and tax savings. The ability to leverage equity is also important for those looking for extra flexibility to pull out emergency cash or accelerate the expansion of their real estate holding.
No matter what your investment strategy is, it's clear that real estate deserves a spot in your portfolio. Here are a few reasons why Doorvest recommends purchasing rental real estate today and you shouldn’t miss out on the opportunity to grow your real estate portfolio.
Top Reasons to Buy A Rental Property Now
If you have the right investing mindset, recent economic headwinds could set you up for long-term gains through owning a rental property.
Factors that have hurt riskier investments over the last few years have made real estate more attractive. The market is now primed and ready for those real estate investors looking for bigger profits.
Higher Demand
New buyer appetites have receded a bit since 2020 due to a lack of inventory and an uptick in mortgage interest rates. Many new homebuyers have delayed purchasing until affordability improves.
This is good news for real estate investors as there is an abundance of consumers looking for affordable homes to rent. Recent data shows that around a third of U.S. households currently rent (iProperty Management).
Not only are more people choosing to rent, but the quality of available residents is also improving. Unemployment has remained low while wages are incrementally growing meaning residents may be in a better spot financially than they were a few years ago.
Similarly, consumers have done a much better job of improving and managing credit in recent history. This is evident in the average U.S. FICO credit score, which has increased to 716 (CreditKarma).
Keeping all this in mind, clearly, there is a ton of opportunity for real estate investors to purchase rental properties to help meet market demand.
Declining Home Prices
Due to decreasing affordability and improving levels of inventory, home prices are finally starting to cool. Nationally, home price numbers across twenty larger cities fell 0.44% in July (Time).
Similarly, home prices continued their downward trend in August, resulting in one of the largest two-month swings in approximately ten years (NPR).
As home prices taper, more investment opportunities begin to emerge making it easier to invest in real estate at lower price points. Your initial investment could be a fraction of what it was a year ago.
According to a recent market update from Redfin, the average sale-to-list price ratio has fallen to a point where homes are now selling at or below the asking price, giving you plenty of room to find a deal that aligns with your investment strategy (Redfin).
Lower Interest Rates
Many new and seasoned real estate investors alike are concerned about the current mortgage interest rate environment. It’s no surprise that the Federal Reserve continues to hold firm on its trajectory to raise rates until national inflation begins to show significant signs of weakening.
However, it's also important to keep the interest rate environment in perspective. Rates in the early 2000s were around 7%. In the 1990s interest rates were up to 10% and in the 1980s 18% respectively. With current rates hovering between 5.5 to 7.5%, comparatively, rates are still historically low.
Buying rental real estate now might actually be the smarter play because you then have the opportunity to build equity over time which can then be leveraged through a home equity line of credit (HELOC) or cash-out refinance once rates begin to soften.
All the while you will be able to take advantage of all the additional benefits that come with investing in real estate. A few of these include appreciation and tax savings.
Conclusion
Real estate has historically been a great asset to add to any investment strategy. However, the latest trends in the housing market now make investing in real estate even more lucrative for new and seasoned investors alike.
Higher demand for places to rent combined with declining home prices and the current interest rate environment have created the perfect storm for real estate investors in search of long-term gains.
Real estate appreciation, debt pay down, tax advantages, and the ability to leverage growing equity are key reasons to invest in real estate today.
If you are interested in building wealth through real estate, Doorvest makes it easy to buy and own high-yield rental homes all from the comfort of your living room. Start taking advantage of all the benefits that real estate can provide today.
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