Housing prices are high and inventory is low. That combination might cause you to wait when it comes to investing in real estate. But I think that's the wrong approach. We're not in normal economic times regarding the housing market; there's no sign on the horizon that the housing market of yore (pre-pandemic) will ever return.
It's getting more and more difficult for regular people, as opposed to institutional investors, to buy property. So if you have the means to invest in real estate today, you might want to, as the conditions favor both flippers and landlords. Plus, real estate provides a great hedge against inflation.
Real estate is a good hedge against inflation
Holding onto cash during a time of inflation is a loser's game. The cash continues to be worth less. And inflation, like housing prices, doesn't appear to be going away any time soon. As the dollar becomes worth less, real estate has been appreciating. Real estate, either housing or land, is a tangible asset, which looks good to investors during inflationary and uncertain times.
Why flipping works right now
While there's much more competition to buy right now, some people are still landing deals. The key is to do your numbers as usual, arrange to buy in cash if possible, and buy a fixer-upper to get a discounted price. The timing is right since foreclosures started happening again as soon as the government lifted the foreclosure ban in August of last year.
The way the market is now, you might be able to sell without even putting money into the home to fix it up. House prices rose 16.9% in 2021. And while no one can say yet what will happen in 2022, many experts predict strong buyer demand and probably more price increases. If you're a flipper, if you want to get top dollar, go ahead and improve the house, and then sell it to someone who wants to be a homeowner, or consider holding onto it and renting it out.
Why being a landlord works right now
Just as with flipping, it's more difficult to get a buy-and-hold investment in today's market. But if you can get one, do it. Of course, do your due diligence first and only buy in an area where people will want to rent. It might be a buying frenzy out there, but investors should keep their heads and only do a deal if the numbers work.
With that said, there's a great demand now for housing. Not only is the usual rental market strong nationwide (note that this can vary by region), it's become stronger from first-time homebuyers who have been priced out of the market or who keep losing out to the competition. The result is that rents are up and vacancies are down. Rents were up over 10% from October 2020 to October 2021, and they're expected to rise another 3.6% in 2022, according to Freddie Mac.
Investing in real estate is all about buying a product that people want. And people want housing right now. If mom-and-pop investors can keep real estate investing on the local level, we have a chance to combat the trend of institutional investors gobbling up all the available housing stock. Mom-and-pop investors, by not throwing in the towel, can help ensure buying real estate remains something average Americans can do.