While many people may feel that the economy is on shaky ground, experts like David Ebrahimzadeh are encouraging investors to buy into real estate. Real estate is a good investment because it generally appreciates over time.
As far as a return rate is concerned, real estate investments typically receive about 10.5 percent in annual returns. This compares favorably to stocks, whose annual returns typically average around 7 percent.
David Ebrahimzadeh explains the six reasons why this is the right time to invest in real estate, offering suggestions for would-be investors who want to get into the market.
1. Recessions and Delinquencies
When the economy is entering a recession, this means that many people lose their jobs or enter periods of economic instability. Homeowners may become distressed because they can no longer afford their mortgages.
If you have the right knowledge, you could experience a great opportunity to help homeowners in your area and make a difference in the community.
2. A Flooded Market
When there are many foreclosures, there is often a flood of homes on the market. This oversupply can drive prices down, but you have to be careful to invest in homes that will not cost too much to sell. If the property has too many physical problems, it may not be worth buying it.
3. Low Mortgage Rates
Right now, low mortgage interest rates are presenting an excellent deal to real estate investors. When people who are not in financial distress due to the coronavirus look at the market, they may see dollar signs. Selling a home with low interest rates, however, may cause some sellers to raise their asking price.
4. Investing in Rentals
One of the hottest real estate tips that is useful right now is the growth of the rental market. A multifamily home can be a great investment because it provides passive income. Right now, rental vacancy rates are very low, and rents are on the rise. If you can find a multifamily building for sale, this might be the perfect time to buy it.
5. Investing in Owner-Occupied Property Versus Rentals
Your real estate strategy needs to change based on whether you are buying a property to occupy or rent out. If you are buying a property to use yourself, you should think long and hard about whether it makes more sense to rent or buy. It typically takes 7 to 8 years to recoup the costs associated with buying a building and to make it worthwhile to sell the property.
If you are buying rental property, your main concern will be the amount of money the property will generate. You will need to understand the rental market and the expenses of maintenance.
6. Understand Local Economic Conditions
Before you buy a home or commercial building, you will want to understand the economic landscape surrounding it. For example, if you are in an area with a very high unemployment rate, you may find that your renters can’t pay you what you are owed. If the property is deeply impacted by the pandemic, it may be better to stay away from a rental perspective.
Resources You Need to Succeed
The first resource that you will need to succeed in real estate is reliable financing. If you don’t have reliable financing like loans or personal wealth, you may find that you can’t move quickly when you find a deal. You will need to develop a relationship with a lender before you start investing in real estate.
Next, you will need promising leads. There will be a glut of homes on the market due to the worsening economic conditions. If you have the right leads, you will be able to see through the clutter in the market and find the homes in which you want to invest.
You will also need accurate cost estimates for the properties you want to buy. You should also think about getting a tool that estimates all of the repair costs you will need to spend on a new property. Distressed mortgages often result in homes that have not been properly maintained due to a lack of funds.
Taking the Leap
When you are armed with actionable data, you will find it much easier to invest in real estate. Understanding how the market works and the pressures that some people feel to buy, or sell can bring you insight into the process of investing in real estate. Keep in mind that real estate has a higher rate of return than stocks, especially in situations where the market may be volatile.
As a real estate expert, David Ebrahimzadeh is ready to invest in today’s market. He offers these tips as a way to help you take the plunge.