There are shifts happening in the background that are changing the best and most desirable methods of investing in real estate.
Watch out for the impact these factors may have on the market in the next year, and use your knowledge to get ahead of the curve with your own investments and benefit from it.
Cash & Taxes
With huge new spending bills to pay for, the government is working overtime to find every dollar changing hands and ensure none escape taxation.
We’ve seen this with new tracking and reporting rules for transactions and earnings as little as $600 from the previous $10,000. As well as $80B in additional funding being given to the IRS to trace down tax dollars and enforce payments.
In December, 2021 it was also announced that the Treasury Department is working on new regulations to clamp down on all cash real estate purchases. Until now that was limited to transactions over $300,000, and just in a few gateway cities.
Cash buyers have recently played a major role in the single family home market. This could be a big turn off. Even those with nothing to hide simply may not want to be at the top of the list for investigation by the IRS and or special criminal task forces
Fintech lender Better mortgage recently hit the headlines after its CEO laid off over 900 employees, citing changes in the mortgage market. That is right after having hauled in $750M in new funding, and hoping to go public with a valuation of almost $8B.
Others, like Zillow who have tried to jump into the mortgage business have also been running into financial trouble and have been laying off large percentages of their staff.
If paying all cash is a turn off for home buyers, and mortgages become much harder to get, this could dampen the single family home space, especially for retail home buyers.
If there was one big thing that COVID lockdowns and restrictions taught everyone, it was the need for multiple streams of income, and specifically passive income.
The ability to bring in income, regardless of where you are, and if you can get to work or not. Second to that is the big failures of Zillow, Better and others showing that investments backed by tangible assets, not just virtual stocks are vital.
Neither fixing and flipping houses or being a hands on landlord are very passive.
Expect this to translate into more passive investment into real estate syndications, funds and partnership structures. Specifically into the multifamily rental apartment space. As well as potentially self-storage and other properties that benefit from current shifts
How are you investing ahead of these shifts in the markets?