The time for buying an investment property has come!
A successful real estate investing career depends on many factors, most importantly location and time!
The real estate market is always changing – what was a good location for buying an investment property 10 years ago might now be a bad location. Consequently, owning investment properties can be a smart investment decision or a financial disaster for property investors depending on WHEN they’ve made the purchase.
Therefore, entering the real estate investing market is not a decision that you can make overnight. Before buying an investment property, a real estate investor needs to perform a real estate market analysis and study the housing market of his/her choice. Doing so will ensure real estate investors that they’re buying investment properties in the right location and at the right time!
In general, 2018 is a good year for real estate investing in the United States. A number of factors prove this statement – which is what we’ll be discussing in this article. So, if you’re interested in the real estate market, keep reading to learn why now is a good time for buying an investment property in the US housing market.
Optimistic US Housing Market and Economy
Last year, the US economy and real estate market showed great resilience despite some concerns. According to real estate experts, the US housing market for 2018 continues to look good. Real GDP growth is expected to be approximately 2.8 times faster than the annual pace of 2% over the past seven years.
In addition, economic growth is visible among both developed and emerging economies for the first time since 2011. This continued strength of the US economy will support a healthy real estate market, which is great news for real estate investors.
As new supply remains in check and with a strong job market, the real estate market should continue to be strong as demand for investment properties remains high. Overall, this is a good sign for a real estate investor thinking of buying an investment property in the US housing market this year.
Numbers Are Going Up
If you are buying an investment property in the US housing market, you should do so sooner than later as numbers are going up! For property investors, this could be both a positive and a negative thing.
As demand for investment properties remains high, while the supply remains in shortage, this will result in a growing Net Operation Income (NOI) as well as real estate appreciation rates. This leaves a positive impact on property investors because it allows them to raise how much monthly rent to charge tenants, as well as build equity and the value of their investment properties. Thus, if you’re buying an investment property now, you’ll ensure positive cash flow and high real estate appreciation, meaning an overall good return on investment.
However, NOI and appreciation are not the only numbers going up. A real estate investor planning on buying an investment property and financing the purchase with a mortgage loan should be aware that mortgage rates are also raising.
Click here to learn all about the different ways to finance the purchase of an investment property!
Not only that, but home prices are also on the rise. Last year, the US housing market witnessed an increase of 6.2% on home prices. According to Forbes, home prices will continue to rise in most of the nation’s real estate markets – property investors should expect an increase of 2-6%.
If you already own investment properties, then you’re in luck. However, if you’re a beginner real estate investor, you may want to go ahead with buying an investment property sooner than later. If not, you might struggle with affordability, especially in a high-priced real estate market like San Francisco, New York, Boston, and DC.
New Tax Reforms
Before buying an investment property, a real estate investor should have a general understanding of tax law as it can either cost you or end up saving you a lot of money in real estate investing. The new tax reform (which was signed last December and took effect in January) has both positive and negative impacts on real estate investors.
The new tax reform generally favors the commercial real estate investing sector. This is how commercial property investors will benefit from the new tax reform when buying an investment property:
- The change to the mortgage interest rate and state and local sales taxes may deliver benefits to commercial real estate investors, mainly multi-family property investors in high-priced metro areas (such as New York and DC) as workers shift from homeownership to renting closer to their jobs. Moreover, renters may have more disposable income available to pay the higher rents required in such a high-cost real estate market – which is good news for buying an investment property.
- No changes were made to the existing FIRPTA (Foreign Investment in Real Property Tax Act), 1031 revenue reinvestment laws, LIHTC (Low Income Housing Tax Credit), or carried interest rules. Therefore, commercial real estate investing remains attractive to both domestic and international real estate investors.
- Furthermore, REIT investors will benefit from the tax breaks that “pass-through” businesses will receive as investors can now deduct 20% of their REIT dividend income.
Final Words on Buying an Investment Property
To sum up, the US housing market is generally a good place to start a real estate investing career. If you’re planning on buying an investment property, 2018 might be your year! Thus, we advise you to not waste any time and start your property search now.
To learn about how our platform makes searching for and buying an investment property easier, click here!