There's a lot of opportunity for real estate investors these days.
Rents jumped 19% in December 2021, the typical short-term rental listing is earning 26% more than in 2020, and home values are constantly climbing, making flips an attractive investment as well.
Unfortunately, snagging a property isn't so easy. With extremely limited supply and high demand from both traditional buyers and investors, the market is incredibly competitive -- and by spring? It's only going to worsen.
As a real estate investor, are you hoping to make some real estate moves in the near future? Here's how to succeed despite the hot spring market.
1. Have cash on hand
Cash offers give you the best chance of success in today's market. In fact, according to an analysis from Redfin, they actually increase your shot at winning a bidding war by 290%. They might even allow you to pay slightly less than other buyers as well (many sellers like the certainty of these bids and will negotiate more on price to secure them).
2. Be ready to act fast
Homes are moving fast these days (about 10 days faster than this time last year, according to Realtor.com), and demand far outstrips supply, meaning you'll need to act pretty quickly if you want to snag a property.
To do this, you'll want to:
- Have a real estate agent you trust. You want someone who knows what you're looking for, what you're willing to spend, and how to structure the deal so they can submit offers at the drop of a hat (even if you're busy or unavailable). You also want someone who's got plenty of bandwidth and can stop everything to check out a listing, draw up a bid, or put together a counteroffer with very little notice.
- Be available. You might need to view a house and put an offer on it all in the same day if you want to succeed in this market, so make sure you have the process laid out to make it happen. You should also talk with your agent about prepping for potential Zoom or Facetime tours in case they're necessary, and having an e-signing tool on your phone or laptop is smart as well (so you can sign those offers, no matter how far you are from a property).
- Get your financing in order. If you're using a loan for your purchase, make sure you're preapproved before starting your property search. You should also think about locking your rate, as mortgage rates are expected to increase this year as the Federal Reserve tightens its monetary policy.
In short, have your ducks in a row and be ready to make a move at a moment's notice.
3. Cast a wide net
The wider net you can cast in this market, the better. That might mean expanding your search to include not only single-family homes, but duplexes, triplexes, and quadplexes too. It also might mean scouring other, non-MLS sources in your search -- auction platforms, short sales, REOs, and wholesalers. Taking a more hands-on approach and contacting local homeowners (particularly ones facing foreclosure) is also an option.
4. Consider alternative markets
Housing is hot right now, but every city's real estate market is different. You might be able to get more for less by branching out into further-away suburbs or rural markets, or you could find more supply elsewhere.
Consider connecting with agents or other investors outside your market to get a feel for what's happening on the ground. You might also throw markets you'd consider vacationing to into the mix. You could easily turn a property there into an Airbnb, which you could use part-time and then rent out.
Prep today to buy tomorrow
It's a hot time for housing -- and the spring market is shaping up to be no different. If expanding your investment portfolio is on the agenda, start preparing now if you want to win out.
Get your cash or financing in order, start researching markets and potential agents to work with, and get clear on what you're looking for and what you'd be willing to negotiate on. The more work you put in now, the more likely you'll snag that perfect listing once it hits the market.