If you’re like us and you’ve been paying attention to headlines in the housing market within the last year, then you probably know all about the media’s outlook. Rates for long-term investment loans took off in March and have continued to rise throughout the year, while constraints on housing inventory have kept prices sky high. Those prices have been falling in recent months, prompting some reporters to claim that the housing market is crashing on a level not seen since 2008.
It’s tough to say with a straight face that 2022 has been a great year for homebuyers, but it’s equally difficult to compare what’s happening now to the beginnings of the Great Recession of the latter half of the aughts. While it’s true that foreclosure filings are increasing compared to recent years, it’s important to understand that this isn’t due to a subprime mortgage crisis, and that the large increases are compared to years in which foreclosure activity was brought to a near complete halt. What we’re witnessing now is a correction in the market – and savvy investors know that now is a great time to buy in. Let’s explore some reasons why now is actually a great time to be investing in real estate.
A Down Economy is a Signal to Buy
When the economy hits a downturn and unemployment increases while the stock market sheds value, there is almost certain to be an abundance of distressed assets in the market. Those who bought homes at inflated values may find themselves in a position to have to sell, or may be foreclosed on, leading to a rush of value-priced assets in the marketplace. As home prices fall away from the highs of 2021, opportunities for investors to come in and get great deals increase – after all, smart investing is more about time in the market than timing the market.
While increasing mortgage rates are keeping a lot of investors on the sidelines, many see this moment as an opportunity to grow a property portfolio that can later be refinanced at better rates for a cash out opportunity. A lot of private lenders – Pimlico Capital included – have begun offering adjustable rate mortgages specifically for this purpose. As interest rates increase, it becomes more likely that they’ll come back down to earth within the next 5-10 years.
Opportunity Zones Provide a Tax Haven for Investors
In 2017, the Tax Cuts and Jobs Act established the Qualified Opportunity Zone program to provide a tax incentive for investors to establish long-term investments in economically distressed communities throughout all 50 states, the District of Columbia, and 5 US territories. By investing in properties within these designated Opportunity Zones, investors are able to avoid capital gains taxes. While providing financial incentives for investors, this program is also helping communities reclaim livable spaces, helping to ease inventory constraints and encouraging economic growth. Overall, it’s a win-win for all involved.
Advancements in Technology Make Real Estate Investing Easier
While a number of speculative markets have cropped up (including crypto assets and NFTs, for example) since the advent of the internet and smart mobile devices, technology has made it easier to invest in real estate even on a small scale. Platforms like HoneyBricks and PeerStreet not only allow investors an easy way to enter the market with as little as $1,000, but they offer greater liquidity than any other investment platform previously has. By tokenizing real estate investments, individuals are able to trade in a way that was not previously accessible, and makes these investments much more attractive.
This method is still in its relative infancy, but given the potential for profitability and flexibility, a lot of forward-looking investors believe that this is the investment method of the future – and it’s available now in 2022.
Beyond investment platforms built on cutting edge technology, high tech investors are able to engineer software to better leverage data to give them key insights into how profitable physical real estate deals may be. Flippers are able to more accurately calculate ARVs, while long-term investors can more accurately predict the long-term value of an asset, all using advancements in technology for their benefit.
Simply Put, Don’t Believe All of the Media Hype
While staying informed is absolutely essential to running a successful real estate business, it’s important to distinguish between an actual crisis and a situation that the media is feeding. While the real estate market has undoubtedly faced challenges this year, professional real estate investors don’t need to cease all investment activities and cash out due to impending doom.
At Pimlico Capital, we know that our success hinges on the success of the investors that we work with, so we’ll always be sure to steer you in the right direction. If you have properties that you’re considering acquiring but you’re unsure of how best to go about it, speaking with a member of our loan origination team can help you determine what options best suit your investment style. For a free, instant quote, feel free to fill out our rate calculator or give us a call at 410-866-4600 today!