Real Estate Investment Strategies in a Changing Market

Real estate investment in a changing market - conceptual image

It’s no secret the real estate market has made a big shift this year. An inflated economy and rapidly rising mortgage rates have driven some home buyers out of the market. Most properties are still going up in value, but the rate of appreciation has slowed significantly. This presents some great opportunities for real estate investors who want to buy houses for flipping or rental. However, you have to be smart about your investment decisions. Your plan and budget need to be adjusted to match the changing market conditions.

Here are a few key factors today’s real estate investors need to consider:

Good Opportunities

With less buyer competition, slowing prices and increases in foreclosures, there are some more opportunities for real estate investors compared to the last couple years when every property seemed to sell quickly. Many houses are sitting on the market longer—especially those which need some work. Sellers are making price reductions and accepting lower offers. As an investor, you still need to do your market research and think carefully about any offers you make. You have to determine if the investment is worth your while and how much profit potential it provides.

Rising Material Costs

You may have more houses available to you at lower prices. However, you also have to consider the rising costs of renovations. Construction materials, labor, fuel and other expenses are very inflated right now—and prices aren’t coming down any time soon. You have to plan out your renovation budget carefully and build in some room as prices could go up even more throughout the construction process. You may need to cut out some more expensive ideas or create a more conservative renovation plan that allows for the maximum profit potential when it’s time to resell or rent out the property.

Home Values

Most real estate experts anticipate home prices continuing to go up for the foreseeable future. Just the rate of appreciation has slowed down, so your profit margins may be thinner in the end. You must anticipate future market conditions and projected prices as part of your property analytics process. A house may seem like a great deal now, but how much meat is really left on the bone when your renovation is complete?

Rental vs. Resale

The changing market conditions could also affect your decision on what you want to do with a certain property. Rent prices are going through the roof, so holding onto a property as a rental unit—at least for awhile until it appreciates more in value—could be a good plan compared to a quick flip. Again, do your market research and craft your investment plan/budget carefully to ensure the best possible results.

Financing

How you are financing your purchases and constructions will another very important issue to consider. The cost of borrowing money is very high right now, whether it’s a mortgage, a personal loan, or private funding. Understand how you are financing your investment and how any additional fees or higher interest rates will eat into your profit potential.

In some ways, the real estate market right now is ripe for the picking. In others, it is a money trap waiting to happen to those who aren’t properly prepared. Smart investors know how to navigate changing market conditions and adapt to the ebbs and flows of the market. Investing in real estate is rarely a bad idea, especially if you know what you are doing!

Lastly, you can consider joining the PropertyLark home buying network. Exclusive membership gives you access to advanced property analytics tools, excellent off-market deals and other great resources to help you make the most of your real estate investments.