As the year nears its close, it is important to consider the current market of real estate, analyze trends and consider your investment options for next year. Here is what you need to know about the current state of the union of real estate investing:
More Stringent Lending Guidelines
After the Great Recession of the early 21 st century and the real estate bubble burst, more banks and financial institutions are being more stringent when lending to borrowers. Lenders more heavily scrutinize loan-to-value, loan-to-cost, and debt-to-income ratios.
Increased Flipping Activity
Due to positive economic indicators, more individuals are engaging in flipping. Unlike the time just before the Great Recession, the proportion of inexperienced flippers is much smaller than the full marketplace; which can help avoid foreclosures and decrease property values.
Low Risk, High Reward
While the stock market has experienced an unprecedented amount of market volatility, real estate is considered one of the safest investments. The year 2018 has resulted in a year of low risk and high reward for many investors. Property prices are on the rise, interest rates are relatively low from a historical viewpoint, and unemployment rates are low. This has inspired many individuals to venture out and purchase property. Additionally, individual investors have chosen to invest in a more diversified market. Property values are increasing while the economy is, too.
The Emergence of Zillow and Other Disrupters
Increased seller demand has influenced different types of investors to emerge into the market. For example, Zillow has begun purchasing properties directly from sellers to test real estate flipping options. The program gives sellers the opportunity to upload information about their homes and receive offers from local investors. Zillow itself bids on some of these properties in target markets like Phoenix and Las Vegas, setting a goal of purchasing between 300 to 1,000 homes by the end of 2018. Zillow also receives income streams from seller fees and agent commissions.
Fintech and Digitalization Influences the Market
Fintech startups are having a significant impact on the real estate industry. This has decreased the costs of investing because the middleman is not necessary, so costs are lowered. Additionally, fintech has provided a new way for investors to enter the market. Previously, investors could only purchase a property or participate in a real estate investment trust. Crowdfunding and other options now allow multiple individuals to pool their money toward a single investment in property. This allows individuals to secure the funds necessary to complete their investment project without having to depend on traditional banks and regulations. Investors can select properties that meet the needs of their investment portfolio and expose them to a level of risk that they can tolerate.
Additionally, the market is more digitalize than ever. Investors can connect through digital means to establish unique investment projects. Investors also have a greater ability to view potential properties with digital assistance.
I help investors who are looking to diversify their portfolio and enjoy stable monthly cash flow by locating property that is both “on-market” and “off-market”.
If you would like to learn more about investment opportunities, I offer a free consultation to interested investors: https://www.arthurnachman.com/hot-properties/