Real estate investing is one of the best ways to generate passive income, increase your net worth, and diversify your investment portfolio. It provides a tangible asset that can offer long- and short-term profit. Though the real estate market has steadily and consistently increased over the course of the past century, there are smaller fluctuations within the market.
Paying attention to these fluctuations can help you take advantage of opportunities. If you’re a seasoned real estate investor, now may be the perfect time to increase your investments. New investors can also take advantage of this market change to begin their investing journey. Here’s everything you need to know about why we’re entering the best real estate market opportunity since 2008.
Key Takeaways:
- High interest rates and rising home prices may push homebuyers from the market, leaving room for real estate investors.
- Demand for renting due to the public’s inability to buy homes may make renting properties more lucrative.
- Investing in the real estate market now may net you a higher return on your assets.
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Overview of the Current Real Estate Market
There are two factors that are currently affecting the real estate market: high interest rates and rising home prices. Though many people believe the prices of properties, especially residential homes, is likely to fall because of the looming recession, it may not happen that way. In the past five recessions in the United States, housing prices rose in three of them and fell in two. During the 1991 recession, home prices fell by just 1.9%.
When you compare that to the 19.7% decrease in 2008, it’s obvious that a drastic reduction in the prices of homes is the exception rather than the rule when it comes to recessions. It’s likely that the drastic reduction in the cost of homes during the 2008 recession was due to its unique circumstances. Because so much of the collapse was tied to mortgages, home prices were one of the primary factors affected.
Benefits of Investing in Real Estate
Unlike the stock market and other investing outlets, real estate investing often provides you with a tangible asset. These are some benefits you may experience if you invest in real estate:
- Passive income: When you invest in a rental or commercial property, you can often collect rental payments from those using the building or area. This can help you develop a form of passive income that can fund other expenses or investing activities.
- Tax deductions: As a real estate investor, you gain access to several tax benefits, including capital gain exclusions, mortgage interest write-offs, and other credits.
- Low volatility: The real estate market isn’t immune to volatility, as the 2008 crash proved, but it may be more stable that other methods of investing, like the stock market.
Why the Current Real Estate Market Is the Best Opportunity Since 2008
These are some reasons now might be the best time since 2008 to invest in the real estate market:
Interest Rates Are High Right Now
The Federal Reserve has been steadily increasing interest rates over the past few quarters, which can be good for savings accounts but not so good for financing. People may struggle to get a mortgage that they can afford right now due to the high interest rate.
Increased Availability of Properties
The Federal Reserve’s high interest rate has caused fewer people to purchase homes. This means there may be fewer people to compete with when purchasing properties, which opens up the market for real estate investors to step in. As home prices begin to decline, people who purchased homes a few years ago may look to sell before the prices drop too much so they can make the most of their investment. These factors together may increase the total number of properties available for investors, making it easier to enter the market.
Low Home Prices Due to Market Correction
Though the recession may not necessarily lower home prices as it did in 2008, we are seeing a slight decline in the cost of homes. Since 2020, home prices have done nothing but increase. However, for the first time since then, prices are finally beginning to go back down. In 2023, home prices may vary based on different factors, but if they continue to decline, it may make it even easier for you to invest in the real estate market.
How To Take Advantage of the Real Estate Market Opportunity
These are some steps you can follow to take advantage of the current real estate market opportunity:
Do Market Research
One of the best things to do before investing in the real estate market is to research all the factors that determine real estate prices. Though people can make predictions about what may happen, it’s best to do an analysis of the specific area in which you want to purchase a property. Consider local tax benefits as well as how profitable the property may be.
Create a Budget
It’s important to determine how much you want to invest in the real estate market. This helps you make a plan for your investments and avoid overspending. If you want to learn how to form a strategic budget, attend one of our Real Estate Investing Room events, during which you can learn about investing in multifamily homes and developing your portfolio.
Consider Financing Options
To invest in real estate, you need funding to acquire properties. While you can do this with cash, many of us don’t have the money for a multifamily home or commercial lot at the ready. Other financing options, like mortgages, are often the way to go. At this step of the process, consider your options and compare offers from several lenders. Review factors like interest rates, flexibility, and payment plans to determine which lending option is best for you. It’s also important to determine if the rent you charge can cover the cost of your mortgage payment and other expenses.
Work With a Real Estate Agent
Real estate agents are fountains of knowledge. They can help you identify which areas are best for investing. They can also help you locate the ideal properties and walk you through the process of purchasing them.
Summary of the Current Real Estate Market
The market might just be at its best right now. This makes it perfect for those who want to expand their current real estate portfolio or those who want to get started in real estate investing. Here are some benefits and tips for investing in real estate right now:
Benefits of Investing in Real Estate
By investing in the real estate market, you can increase your net worth, generate passive income, diversify your portfolio, and qualify for tax benefits.
Tips for Taking Advantage of the Current Real Estate Market Opportunity
These are some quick tips for taking advantage of the current real estate market:
- Scout out the best area. One way to identify a high-quality real estate investment area is to consider construction projects. If big box stores, airports, and other fixtures are in development, it may be a good idea to purchase real estate in the area.
- Meet with an expert. Even seasoned real estate investors can benefit from a meeting with a qualified professional to learn more about their prospects.
Forget 2008, 2023 might just be the best year we’ve seen for investing in real estate. To learn more or discover how to get started, speak with one of our experts today.