Interest rates. That’s pretty much all you’ve been hearing about when it comes to real estate trends this year. But there’s more going on in the world of real estate investing than you may have heard. And if you don’t stay on top of the changes and opportunities, deals that could have your name on them might go to someone else.
None of us here at BatchService want to see you suffer that fate, so we’ve put together our mid-year report of the most important real estate investment trends we’ve seen so far this year.
Should investors buy with rising interest rates?
We’ll start with the obvious one. Everyone talked about the impending interest rate hike for months early this year.
With real estate prices skyrocketing and inflation creating an uncertain economy, the Federal Reserve raised interest rates to reign everything back in. Rates have more than doubled since early 2022, and the Fed may continue increasing them throughout the year.
So what does this mean for real estate investors?
There will be more cash buyers
First, it means that the housing market is shifting to favor cash buyers because borrowing money has gotten more expensive. While this is a great opportunity for wholesalers, it makes other methods of real estate investing trickier.
Cash buyers aren’t the only ones who can invest, but you need to be aware of your margins if you are borrowing from a lender to purchase. Your monthly payments will be higher and you will pay more in interest over time, especially if you’re buying a rental property or you have to hold the house for longer than you planned.
Rental properties will be more profitable
Secondly, there are a lot of people who don’t want to buy anymore. The combination of interest rates and housing prices make buying unattractive for some and impossible for others. So these individuals are turning to long-term rentals.
This means that if you’re looking to hold property and rent it, rising interest rates may work in your favor. However, if you’re new to rental investing, remember that there are unique challenges that come with this form of real estate.
Supply and demand
Over the last few years, there has been a steady increase in buyers, but the number of on-market homes for sale has remained steady. As a result, there are more buyers than sellers, which leads to competition and higher prices. Supply and demand are economics 101, but what comes next is a bit more uncertain.
There are many buyers leaving the market because of interest rate increases. While this should decrease competition and lead to lowered prices, there are still more buyers than sellers.
Additionally, interest rates are discouraging many homeowners from selling, because when they buy a new house they will likely have a higher mortgage rate. This could further increase demand, sending housing prices even higher!
So if you’re ready to buy, here are a few factors you should consider to maximize your ROI:
- What are the financial responsibilities of your existing portfolio?
- What do the numbers look like once you comp the deal?
- If you’re wholesaling or flipping, do you have cash buyers on hand?
- If you’re buying to rent, how quickly can you place renters in the house?
The bottom line is that If prices fall, there will be more inventory. If prices continue to rise, each deal will be worth more. Whatever happens, savvy investors will turn the situation in their favor.
The best course of action is to create a solid investment strategy before you buy anything. Remember to do the math and calculate your margins to ensure you come out on top.
Is city real estate still a good investment?
City living, which has been a defining characteristic of the American Dream for many years, is quickly losing popularity. The metro areas once seen as hubs of growth and opportunity are now becoming the places people want to get away from.
This is especially true for some of America’s biggest and most famous cities and states, including New York City and many of the metropolises in California. Experts say that more people than ever are looking for property in suburban and rural areas.
A lot of people are interested in leaving big cities simply because the COVID-19 pandemic disrupted life. Many big cities had very strict lockdown policies or became increasingly expensive over the past few years. These factors have led to a mass exodus from some of the country’s largest cities.
So what does this mean for real estate investors? It means that there are new hot spots. Now, suburban and rural areas in non-traditional regions like the Sunbelt and South East are where you’ll find opportunities. That means that if you’re in New York or California, you may need to change your investing strategy and consider investing or wholesaling virtually.
In fact, some of the greatest deals you’ll ever land could be on the other side of the country. The most important thing you can do is get out there and find them!
Conclusion
We’re only at the midway point of 2022 and there have already been some game-changing developments in the real estate market. The rest of the year is guaranteed to offer more change, but all of it will create excellent opportunities for investors who are knowledgeable and willing to take calculated risks.
As long as you stay on top of the situations that are creating motivated sellers and the challenges home buyers are facing, you’ll be prepared to find and buy the right investment properties at the right times.
