The first thing all real estate investors need to realize is that the market is dynamic. Trends and fluctuations are constant and unpredictable, meaning that successful investors need to be flexible and resourceful in developing their strategy. With the Fed incrementally raising interest rates to mitigate inflation, the overall demand levels from potential buyers is easing as many would-be customers are being effectively priced out of the marketplace. A portion of these individuals will turn to the rental market, whilst others will have to consider a lower price bracket for their next home in order to qualify for financing.
While the current market conditions present unique challenges for investors and aspiring homebuyers alike, there is a bright side to the situation, including:
- The market is undergoing a rebalancing phase and transitioning out of being a disproportionately sellers’ market
- Inventory levels are being consistently replenished, meaning buyers will have more available housing options to choose from at reasonable prices
- Sellers will be more willing to negotiate price adjustments, thereby cutting down on competitive bidding wars
Savvy investors can anticipate shifting market behaviors and leverage these insights to create profitable opportunities. Accordingly, the experts at 17th Street Capital have compiled a quick rundown of some of the most promising real estate investment strategies that are ideally suited for the current market dynamics to help you plan your next project.
Short-Term Rentals on the Rise
Diversifying your real estate investment portfolio by adding short-term rental properties—with rental periods ranging between a couple of days to multiple months—could be a potentially lucrative move in the current market. After you become accustomed with the unique management requirements and the distinctions from longer-term rental properties, you can optimize cash flow and build sustainable passive income. Investors are drawn to the short-term rental approach because the rent is pre-paid and by the close of the five-, ten- or thirty-day (or whatever rent duration you decide on) tenancy you can quickly re-lease the property. These shorter durations allow you to adjust the rental fee in-between tenants to account for market fluctuations more easily than in long-term leases that lock in a set rate for an extended period of time. This inherent flexibility translates into a healthier bottom line at the end of the day.
New Construction Investments: More Opportunities on the Horizon
The real estate market has been plagued by diminished inventory levels for the past couple of years, resulting in astronomical home prices and a lack of available housing options for potential homebuyers. Thankfully, this gap is starting to be addressed. According to the Mortgage Bankers Association (MBA), single-family housing starts are anticipated to hit almost 1.17 million by the close of 2022 and 1.21 million in 2023. Real estate investors can take advantage of this uptick in building by investing in these newly-built homes that will surely be in high demand given the longstanding national housing shortage. Investors should have little to no issues renting out these properties to tenants who are willing to pay a premium for the high-end amenities typically featured in these properties.
The Time is Now!
Now is the perfect time to either start or scale your real estate investment activity. Having a trusted financial partner makes that process exceedingly more efficient and profitable. 17th Street Capital is a Southern California based private lender that specializes in delivering customer-focused, effective funding solutions for all types of real estate investment projects including bridge, fix & flip, term rental, ground-up construction and more. Contact us today to learn more about how we can assist you in achieving all of your investing goals!