Tired of missing out on the huge gains in the real estate market?
This incredible bull run in real estate seems far from over yet. Even for those not already kicking themselves for missing out on strong double-digit gains over the past year, inflation, taxes, and other factors are likely to drive this trend through the next year.
So, what’s happening? Where are the smart investments? How do you participate in it?
The Market Is Still Growing
Many metro areas have seen property prices grow by 30% or more over the past year. Rents have also been growing very fast, with double digit increases.
Bloomberg reports that in Manhattan 50% to over 70% rental rate increases are now common. An estimated 40% of the population fled when pandemic restrictions hit. Landlords lured in occupants with cheap introductory offers. Now those leases are renewing, their rents may be doubling. One tenant reports their landlord asked for a monthly hike to $3,500, after having originally leased for $2,100 a month earlier this year. The tenant declined, and the unit ultimately leased to a new tenant for $4,500 a month.
What To Watch
Continued back and forth migration may continue. As pandemic restrictions resurge and wane, and renters find deals in different types of areas, they may continue to move for a while.
For investors looking to not only take advantage of the current boost to asset prices and cash flow from income properties, but to sustain them for the long term it makes sense to look for markets with fundamentals that will remain strong in the new normal, and for affordability.
More Growth Ahead
Before the real estate market moderates, we typically see a crash in other sectors, like the public stock market. When we see that happen, investors flee stocks and other alternatives like crypto, for the yields and downside protection of real estate. This in turn creates an additional spurt in growth in this sector.
Rapid inflation and new tax hikes are also making real estate a must for investor portfolios, and warranting a much larger share of their asset allocation.
How To Make The Most Of It
Especially as we move into fall and winter, we may see more attractive real estate acquisition opportunities. There are great moves to be made in both value-add and long-term hold investments.
In this competitive market, a passive and hands-free investment approach, with professional management still seems to be the wisest way to participate in this sector.
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