What is your strategy? Are you looking to build wealth through a buy-hold-rent approach? Maybe you are looking for opportunities to fix and flip properties? If you are more experienced, perhaps you are looking to purchase commercial properties and to develop real estate. Regardless of your particular strategy, one thing applies to all real estate investors.. know the market!
It is important that you set a strategy that fits the marketplace. Variables that can influence your investment strategy can include: interest rates/financing, vacancy rates, property prices, rent levels, employment levels/proximity to jobs, population demographics, government zoning changes, new development, etc. These variables change over time and across different real estate markets, so it is imperative to spend the time to understand the market before investing.
Over the past 10-15 years, we have seen a dramatic change in the US real estate market. From 2001-2006, changes in government tax policy, deregulation of the financial sector, loosening of lending standards, and low interest rates resulted in increased demand for real estate. This drove home ownership rates and prices to record highs. As prices continuously rose, many people pursued flipping, which seemed at the time to be an almost risk-free strategy. Unfortunately when rates rose and home owners could not afford to continue making payments, foreclosures rose and prices plummeted.
In 2016, the home ownership % stands around 63%, the lowest it has been since 1965! Millennials are fearful of making this type of investment after having seen the potential for losses in an asset that for decades was seen as stable and always appreciated. In addition, they are burdened by student debt and have delayed other life choices like marriage and parenthood, which are drivers of home ownership. It is also more difficult to qualify for a mortgage today as lending standards have tightened.
As a result, there is a strong demand out there for rentals and an opportunity for you to profit “big league” (as Donald Trump says) from a buy-hold-rent approach. The purpose of this newsletter is to discuss the ways in which people from all walks of life can take part in this game. Whether you are purchasing a condo or a multi-family apartment building, the ability to find good deals and generate passive income can help you build wealth and fulfill your financial goals.
Over the next subsequent newsletters, we will discuss some of the benefits real estate investing has over other investments like stocks and bonds and provide some unique tips and advice to get you started on your journey.
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