Real estate can be an intimidating market to navigate. Fluctuating interest rates, high listing prices, and competitive markets are all factors that might prevent you from investing further. But if you already own real estate, then now could be the best time for you to consider purchasing an investment property. Several factors have fallen into place with the current market, making it possible for many homeowners to expand their investment portfolio.
You will quickly learn how owning an investment property has its perks. Search online to find current listings and see what properties make sense for you to own.
Here’s a rundown of why now is the time to invest in real estate.
What’s an Investment Property?
Typically, the first time you purchase property is a listing that you intend to live in, whether it be a condo or house. Investment properties are purchased with a different intention.
Investopedia describes investment properties as real estate purchased with the goal of earning a return on the investment. This means your goal with the property is to make a profit. This can be a long or short-term goal, depending on how you approach the investment.
For short-term investors, they may put money into the property to flip it through remodels and renovations. They can later sell it at a higher price and make a profit. Other investors may decide to earn income by renting out the property to tenants.
Benefits of Investment Properties
Interest Rates Are Lower Than Ever
One of the factors that can make or break a real estate investment is the interest rate. The lower the rate, the easier it is to borrow money and put it towards property.
The good news is the U.S. has been dealing with record low interest rates over the past year. In fact, Freddie Mac announced that the 30-year fixed-rate average dropped to 2.67 percent and the 15-year fixed-rate average went down to 2.17 percent in 2020. Better yet, it seems that this downward trend won’t be going away anytime soon.
CNBC reports the federal government will keep its benchmark interest rate near zero. This means you can buy an investment property with sky high interest rates, helping you save money and get the most back on your investment.
Demand for Rental Properties
It’s tough for renters right now. While many of them can’t afford to purchase property of their own, many are having difficulty finding long-term places to live. Mashvisor says this results in a large tenant pool waiting to rent it.
You could find good, reliable tenants to live in your property and pay rent. The money can be put towards your mortgage or once it’s paid off, the money can become passive income for you.
Rental Property Can Become a Vacation Spot
Maybe your property is located in a bustling city with lots of tourists or nestled along a lake where people go to unwind. With homesharing apps like AirBnB becoming as mainstream as hotels, you could quickly earn money by renting out your property for temporary short stays.
You could list your home for rent and have people stay there for a few nights or weeks. Short term stays mean that you would have more people staying at your property than long term renters. You could charge at higher rates per night and potentially earn back on your investment quicker than you would with a long term tenant.
Possible Negatives to Investment Properties
It’s important to know the good and bad before investing thousands of dollars into a new property. There’s a lot to consider and smart investors need to know what they’re getting into before committing to purchases.
Firstly, it’s possible you won’t see a return on your investment for a long time. In fact, it can take investors years to make any money. It could be worth it for long haul investors but not those who are looking to make a quick dollar.
Owners who choose to rent out their property should know the risk of tenants falling behind on rent. One census reveals around 12.4 million adults are not caught up on rent. Consider how being a landlord would impact your finances in the event that a tenant cannot pay their rent on a timely basis.
Lastly, you need capital to purchase a property. At least a 20 percent down payment would be ideal. Not everyone has the means to go through with this purchase.
Fortunately, with the low interest rates currently happening, you might be able to refinance the mortgage on your first property. This would give you a lower interest rate and perhaps help you get the necessary funds to finance the purchase of an investment property.
Learn More About Real Estate Investments Online
Real estate can be a worthwhile investment for those looking to make a profit. With some research and discussions with experts, you can learn how to successfully buy and eventually make a profit from an investment property.
Search online to learn more about how real estate investments can help you financially. Look into the current interest rates and see if it’s a feasible option for you to go through with it. It could end up being an ideal investment to add to your portfolio.