Investing in real estate involves purchasing properties and renting or selling them to make a profit. In truth, real estate has limited liquidity when compared to other forms of investments.
However, it is an attractive investment, because over time, the value of the property can go up. In addition, real estate is far more predictable and stable than most other forms of investments. For any questions, contact Rebeccas Realtor and we will be happy to answer any questions!
Like with any other form of investments, information will be the key to your success. Therefore, today we are going to cover some of the concerns in the real estate market. You will also find valuable information on how to overcome these challenges.
Interest Rates Have Gone Up
Interest rates are influenced by the economy. Currently, the economy is not doing so well, and the real estate market is already feeling the change.
The demand for property has decreased, and the mortgage rates have increased. Increased interest rates make housing less affordable, and limit the appreciation in value of real estate properties.
An increasing interest rate is not all bad news for investors, though it is true that it is more costly to acquire properties. However, the increased rates attract higher rental prices, which is good news for any property owner.
Lower Rent In Big Cities
In most big cities, rent has dropped. What used to be the rent in 2016, in New York City, has fallen by around 15%. Before investing, look at the rental rates curve to see if rental prices has fallen or if they have gone up.
That does not mean you should wait until the rent rates hike so you can invest. Transfer the drop in rental rates to the buying price. That is to say, you should buy property at a price that is 15% lower than the price of peak rental periods.
Buying property at a peak price, when rental prices have gone down, translates to you paying for the property at a higher valuation. The bad news is that situation could last forever, slowing down the increase in your yield on the property.
Homes Are Selling Faster
Even with the increased interest rates, homes are selling more quickly, compared to similar periods last year. Millennials are looking for larger spaces to expand their families, which might be the reason behind the fast rate of homes sold.
Sellers are ecstatic with new trends. Not only is the trend reducing the pressure that comes with selling a house, but it also means a home could sell at a higher price.
But for buyers, the trend means there is a lot of competition, and the prices are going up. To beat the competition, you have to prepare your finances in advance, and be sure of the kind of house you want.
Also, consider hiring an experienced real estate agent. Real estate agents are pros in negotiations, and are more likely to find better deals.
Whether you are an investor, a buyer, or you are merely looking to sell your home, these trends and challenges should concern you.
Real estate is capital intensive and in the case of buyers, a lifetime decision. So, study the market or work with professionals to avoid making costly mistakes.