Investing in the current housing market can be quite confusing especially without knowing the current trends in the market. It is no secret that the US housing market will have you questioning how to invest money. This is especially true given the low point the market hit just a few years ago.
The United States housing market has recovered, however, allowing many to make the best real estate investments of their lifetime. Before real estate investors embark on deciding how to invest money in the current market, they ask a few questions. The first question a successful real estate investor should ask should be about the pros and cons of investing in the current housing market.
Pros of Investing in the Current Housing Market
Diversity in the Current Housing Market
A big plus in the current housing market is the diversity of investment strategies you will be able to use. For example, you will find single-family, multi-family, and commercial investment properties to buy. These different types of real estate investments also allow you to use different rental strategies. Whether short-term or traditional, you have the ability to choose the best rental strategy for your rental property. Diversity in investing is great because it allows you to think outside of the box and to receive rental income in many ways.
Low Risk Investment Options
If you are looking for low risk investments, you can find them easily in the current housing market. You don’t have to stick to buying an investment property. Making money in real estate can be as easy as investing some capital in a real estate investment trust. REITs allow you to invest in real estate just like you would invest in the stock market. This investment strategy is referred to as low risk because you will not need a mortgage to start investing.
Baby Boomers in the Current Housing Market
A huge improvement in the current housing market for investors is the change in property ownership for some demographics. Baby boomers, for example, are currently selling their larger homes and opting for renting apartments. The change could be due to the older demographic wanting a more community-driven environment. This is good news for real estate investors thinking of investing in multi-family rental properties where this demographic is heading.
Generation Z in the Current Housing Market
Another positive to the current housing market in the US is the new generation of tenants entering the market. The demographic usually referred to as Generation Z is beginning to look for rental properties. Generation Z individuals make up 25% of the US population which is a huge customer base for your rental property. Generation Z individuals may also be looking for different amenities than previous generations which gives you an opportunity to be creative with your investment property.
Millennials in the Current Housing Market
If you have been using the buy-and-hold investment strategy, things may also be looking up for you. The Millennial generation is now starting to buy their own first-time homes. The great thing about this trend is the higher budgets Millennials are buying with due to having some help from their parents. Higher budgets mean a greater return on investment if you are looking to buy and then sell single family homes.
The Large Range of the US Housing Market
One of the best features of the US housing market is the extremely wide area it encompasses. The United States is a huge country with very different real estate markets in each area. This is a great characteristic of the market if utilized correctly. If you are not able to afford an investment property in the area you live in, you can buy in a lower priced location. Although the rental income may be less than in your area, it is better than not investing at all.
Cons of Investing in the Current Housing Market
Mortgage Rates are Rising in the United States
Unfortunately, mortgage rates are rising in the United States. Some experts predict a slow increase in rates while others predict an upcoming spike. These rising mortgage rates may be an issue if you are currently looking to buy. Higher rates mean that a bigger portion of your rental income will go towards payments. In some cases, it may mean no positive cash flow at all.
There is Always a Risk in Real Estate Investing
One of the biggest issues with real estate investing, in general, is the risk that it entails. Anytime you invest by yourself and not with a company, you pretty much must accept any losses on your own. Financial losses in the US housing market today are not uncommon. Do not underestimate the harm of financial loss when you buy an investment property as it can alter your life completely.
Investing in the Current Housing Market Is not a Walk in the Park
Another negative to investing, in general, is the time and energy it will consume. A lot of people think owning rental properties is easy work. The truth is, however, unless you hire a property manager, you will be putting in many hours to keep your business running smoothly. Consider the time and effort consumption especially if you are thinking of buying property in an area far away from you.
Liquidation Could be an Issue in the Current Housing Market
Another issue with investing in real estate, in general, is the difficulty of liquidating your assets. If you own a rental property and need money in an emergency or you simply want to sell, it can be quite a while before you see any cash. Liquidating real estate assets can take months.
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