Should I invest in Real Estate now?
If we could predict the future, we would be very wealthy and not have to speculate on where to put your hard-earned investment dollars. Real Estate is at an all time high, and it has created some confusion on if it is a good time to invest in Real Estate companies, crowdfunding and REIT’s.
Obviously, there are a lot of questions that must be ask to qualify your investment; what are your goals; both short term and long term? What stage of life are you in? Are you an aggressive, passive, or conservative investor? All these factors must play in your decisions. If you look at the short term market it has been unpredictable, however since the 1950’s home prices basically have never gone down. With the exception of a couple of dips along the way i.e. 2007, if you retained your real estate through these downturn, growth was still recognized.
Some of the naysayers would think that it is risky to invest right now since the housing market has increased in some areas by 25%. Many professional analyst predict that this growth will continue in the next 1-2 years. Normal yearly price increases in the past have ranged from 3-8% nationally, and the current prices will eventually stabilize when both inventory and prices decrease. There are no signs of this happening into 2022-2023, so why isn’t it a good time to invest in Real Estate?
Interest rates are at an all-time low, so developers and end users can afford more with interest rates below 3%. This is very cheap money. This equates to a better yield over the life of the loan, and as long real estate values are increasing faster than inflation, this is perfect for price growth. Consequently, the forecast for returns on your real estate investment should yield double-digit returns.
So short term risk in this environment right now is a little unclear, but long term investments are definitely good and have very low risk. Sector examples are; rental properties, residential multi-family parcels, and mixed-use retail developments. Some of the benefits are Appreciation, Cash Flow, Amortization, Tax Benefits and increased rents over time. Mortgages are locked in and constant, and your payments never increases. The meaning of “Amortization” is someone else is payoff off your mortgage with the rental income that you receive, and you are also building more equity in the property as a result of you paying down the mortgage. These factors over the long run are relatively low risk with somewhat constant expenses.
Will the market continue to go up or will it decline over time. The honest answer is we just don’t know, but either way Real Estate has proven over time to be an excellent way to build wealth. Your investment can be an exceptional way for continuous growth, just be cautious and be selective in the where you place your money.
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