It’s a fascinating time if you’re a property investor: prices are off the boil, rents are rising quickly, and the real challenge is how you make the numbers work after the Federal Reserve has done with raising interest rates to beat down inflation.
National data shows many owners are reverting to their pandemic behavior, putting their plans to upgrade or downsize on ice; a move that’s temporarily curbing supply and fortifying prices.
The National Association of Realtors (NAR) says sales have fallen for nine consecutive months, and the number of those pending is also down for the fifth month. However, recent history indicates this withdrawal only lasts so long before folks want to get on with their lives.
For investors, this makes it an ideal time to begin or expand your portfolio or plan a re-entry.
Careful planning and research will unveil significant opportunities in the medium to long term, especially as real estate rebounds on the back of falling inflation, now down to 6.5%.
Rental income shouldn’t be your problem no matter where you might invest. Occupancy rates are at record levels and, according to Realtor.com, median rents nationally jumped almost 18% in 2021.
Only now are they starting to level off. The drops are minimal even in cities that have experienced substantial rent rises since the pandemic, such as Los Angeles (-3.7%); Phoenix, AZ (-1.6%); Atlanta, GA (-0.8%) and Memphis, TN (-0.7%).
An additional lure is the value trend. Realtor.com reports the median list price of $416,000 for a home in November is down from the $449,000 record set in June.
If you’re looking to invest for the first time or expand your portfolio, I’d be delighted to talk with you. In the meantime, here are a few tips that might get you thinking or serve as a refresher of what you already know:
Up and comers
Neighborhoods experiencing increasing popularity and attracting younger residents are ideal hunting grounds for investment properties. Prices will be below more established areas, offering good capital growth in the medium to long term.
Limit risk
Diversify your investments. Don’t plough all your money into one neighborhood or even the same city. Your portfolio should be spread over several geographies to protect yourself from local volatility.
Cash conscious
Attracting good quality tenants is essential to your success. You can only do that by offering quality accommodation. However, you don’t have to buy gold faucets and the best of everything to do it. Purchase mid-range fixtures and fittings.
Debt danger
Don’t over-leverage yourself. The rental market is producing record levels of income for investors today, but don’t let a couple of empty properties tip you over the fiscal edge.
Favorite rentals
There’s pretty much a market for every type of property right now. Over the years, however, the family home has proven the most reliable at attracting loyal tenants and strong income.
NOTE: The information in this article is general in nature and provided as a general overview only. Always consult your financial advisor or accountant for advice specific to your personal circumstances.