In late March of 2020, the real estate industry collectively appeared to be heading straight off a deep cliff of Grand Canyon proportions as the widespread fallout connected with the rapid spread of the coronavirus threw the market into a downward spiral. While COVID-19 has undeniably impacted very industry to some extent, the real estate market has proven surprisingly resilient and has weathered the turbulent economy considerably well thus far. As opposed to experiencing a historic decline in real estate values, the close of 2020 saw unexpected yet welcome price increases in the majority of the country.
In light of these encourage market conditions heading into a new year, real estate investors are surely breathing a sigh of relief. Projections are that the pandemic will soon begin to subside with the anticipated increase in immunizations and along with that will hopefully be a jumpstart in the global economy. Taking all of this into account, now is an ideal time to start solidifying your plans for investment moves during the next 11+ months. As much as 2020 was unprecedented and new, 2021 is a time where real estate investors get back to basics. If you are looking to hit the ground running in 2021, here’s some pointers to keep in mind over the course of the coming year to set yourself up for success and profitability.
Two of the tried-and-true basic principles of the real estate industry that will remain especially pertinent in 2021 is that inventory will still be tight and interest rates will stick to their near-historic lows. A lowered inventory means that there will be healthy competition amongst those looking to buy; however, the simultaneously lowered interest rates will offer them with plenty of incentive to be on the lookout for attractive properties offering in-demand amenities and features. These two counteracting forces will ensure that the industry as a whole will remain active—the perfect scenario for real estate investors looking to resell fix and flip properties.
Investors can anticipate 2021 to be yet another year when the more things seem to change, the basic principles of successful investing will remain the same. This is particularly true when it comes to investing in residential rentals.
First and foremost, generating cash flow is a priority—it is what makes rentals an attractive option to the majority of investors. Passive income enables the associated benefits related to real estate investing by paying all of the expenses in addition to generating a consistent profit in the form of return on investment. This positive cash flow allows investors to cover mortgage payments while realizing the advantages of appreciation. It further pays for taxes, insurance and maintenance costs. Your role as an investor is to comprehend all of the ownership costs and ensure that the investment property will continue to generate positive cash flow. Thus, the name of the game is the same in 2021 as it has always been: make sure you uncover all hidden expenses to determine an accurate return on investment target to keep your bottom line happy.
When it comes to passive income, you can opt to do all the work of property management and maintenance tasks yourself or hire a third-party property management company. Rental properties offer you several options—the most popular of which is doing all of the work yourself in your youthful age and then transitioning your real estate portfolio into a truly passive income by brining on external help during the retirement phase of your life. Keep in mind that while maintenance expenditures may increase as properties become older, the rental income will also rise to account for them while additional expenditures including mortgage payments decrease in proportion to the generated income. Also note that as the property owner, you are entitled to tax write-offs that include mortgage interest, maintenance, depreciation, legal costs, insurance and similar costs.
Keep all these in mind in 2021 and you will be well on your way to success—regardless of how much things have appeared to change the basics still apply and Express Capital Financing is here to help you succeed.