Real estate deal activity slowed considerably in 2022, and financing is now feeling the slump, as lenders join sponsors on the sidelines to close out the year. So where does this leave the real estate market? Let’s find out.
Following two difficult years of volatility and the inflation crisis, investors are eagerly looking forward to what 2023 brings, especially with the real estate market. You might be wondering why anyone would be excited for investments with all the stock market volatility that has been occurring recently. Despite what’s happening in the stock market, the median average home price has reached its highest in history. Real estate prices have since stabilized and have the possibility of a downward trend.
A stable market with a slight downward trend in prices offers many solid investment opportunities. As it’s uncommon for real estate to trend down for long.
If you’re considering investing in real estate in 2023, continue reading to learn more about the best strategies for avoiding risks while still making a profit. Plus, discover more about the financial landscape of today’s economy and how it impacts the real estate market.
2023 Real Estate Market
With the unemployment rate on a steady decline and wages rising, people have more disposable income to spend on things like purchasing homes or paying off mortgages faster. Additionally, the US economy has stabilized and according to expert predictions, it’s expected to remain so for the next few years.
Interest rates also seem to be stable so far this year, holding at the 6.5% range. And while higher interest rates are creating a notable decrease in demand, they also drive less competition in the marketplace. Interest rates are allowing for an uptick in inventory and helping ease the rate of home price growth.
Even if 2023 does bring a recession, it could also bring a tremendous buying opportunity for purchasing rental homes at discount prices when we would be going into a time of high rental demand.
How to Invest in Real Estate in 2023
- Long-Term Rentals
Rental properties offer many great benefits, making them one of the most sought-out types of real estate investments and the ideal way to break into the industry. Rental properties have the potential to generate streams of income that cover the costs of owning the property, while also providing extra cash. Although property prices are much higher than they were a few years ago, the demand for rentals has been on the rise. Making this a continued profitable investment in 2023.
One of the biggest advantages of investing in rental properties this year, is the ability to pay your mortgage and interest rate off of your rental income. As previously mentioned, rental properties are unique because the income has the ability to cover all costs related to owning them. Meaning as long as you qualify for a mortgage and can afford the property, operation costs won’t be a large concern. Additionally, if you ever resell in the future, you have the opportunity to make extra profit.
- Short-Term Rentals
Long-term rental strategies rely on the entire property to generate a rental income, a short-term strategy only requires one room at minimum, such as an Airbnb. Short-term rental strategies can operate similarly to long-term rentals, but you only rent one or multiple rooms in a house you already own. With this strategy guests only pay per night, which gives you the ability to set and adjust rates based on demand or profit you wish to make.
Just as the demand for short-term rentals are on the rise, so are short-term. Travel is on the rise and people are looking to visit new places. This offers a huge opportunity for beginner investors. This is also a great option because it doesn’t require you to purchase new properties, you can use homes you already own. Just be sure to follow local laws and regulations.
- Fix and Flip
The fixer-upper strategy is perfect for investors looking to turn a profit quickly, instead of generating passive income over a long period of time. This is definitely not the strategy for everyone, as it can involve unique skills, as well as physical labor. This strategy revolves around buying cheap distressed properties, making repairs or rehabilitating them and sellin, for a massive profit.
The biggest advantage of the fixer-upper strategy is the abundance of foreclosures and lack of housing industry in 2023. This presents a huge opportunity for beginner investors to purchase cheap properties and get into flipping.
- REITs
Lastly, one of the best ways to get into real estate investing is through REITs (Real Estate Investment Trusts). This can generate passive income without the hassle of running or managing a rental property of their own. REITs build up a pool of money from investors and use it to buy and operate investment properties. The profits are then split among the investors. This is also a great way to diversify your investment portfolio.
Conclusion
There really is no such thing as the perfect time to start investing in the real estate market. No matter, there will always be opportunities for profit in the industry. One of the best things you can do when it comes to investing is consulting financial professionals. At APO Financial, we specialize in everything from strategic wealth building and retirement planning to estate planning and risk management. Our job is to help you mitigate risks through proper planning, tactical asset management and more. The goal is to protect and grow your hard-earned nest egg.
Landlord Exit Strategy with APO Financial
If you’re thinking of investing in a property, then there are a few things that you should know before you take the plunge. This new year, APO are here to help you enjoy the benefits of real estate investing without all the headaches.
Using a combination of tax advantage programs, opportunity zones and Delaware statutory trusts (DST), we help landlords exit the headaches of direct property management and eliminate or mitigate taxes.
Opportunity Zones: These are areas that have been designated as economically distressed based on certain census criteria. There are over 8,700 designated opportunity zones throughout the U.S. and its territories. Opportunity zones offer the following benefits for landlords:
- Tax breaks — tax deferral, reduction, elimination and potential tax-free income
- Separation of basis and capital gains
- Portfolio diversification
DST Investments: Like opportunity zones, DSTs offer several benefits, including:
- Passive investing
- Tax benefits
- Income generation
- Value appreciation
- Diversification
READY TO TAKE THE NEXT STEP?
As real estate investors grow their portfolios, they need to understand their options for disposal of properties when the time comes. Unfortunately, life is unpredictable and a lot can happen. In order to ensure minimal risk of your property or properties, it’s always best to have a contingency plan in place.
At APO financial, our advisors are highly experienced in landlord exit strategies and can help you build your portfolio to ensure safety of your assets. We offer many benefits to landlords including but not limited to, portfolio diversification, separation of basis and capital gains, tax benefits and tax breaks.
Contact us today for more information about our services, products or approaches. We’ll schedule a meeting that is most convenient and comfortable for you.
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