If you listen to the news, you may be wondering if now is the right time to get into real estate investing. You may be wondering if the economic changes, such as rising interest rates, should turn you towards some other investment opportunities.
The truth is that there has never been a time that real estate investing should not be included in an investment portfolio. Even during the crisis of 2008-2009, those that understood how to buy and sell found that real estate was a great investment.
Rates Are Low and Demand Is High
The Mortgage Bankers Association believes the interest rate at the end of 2017 will be 4.7%, while the National Association of Realtors (NAR) believes it will be 4.6%. Although it is true that interest rates have gone up and will continue to go up through the end of 2017, they still remain at historical lows. Even with these increases, the rate will only be about 1% higher than they were at the lowest in 2016.
In addition to the low rates, the demand for homes far outweighs the supply. When something has a low supply, investing in that thing is a wise move. In fact, this past March, US home sales rose faster than they have in a decade, according to the NAR, while at the same time, inventory of properties dropped 6.6%. All indicators suggest that the housing shortage will continue for some time, meaning that the housing market will remain strong.
Real Estate Investing Comes With Great Benefits
In addition to low interest rates and low inventory, owning real estate has many benefits that make it a great investment vehicle.
People Need Housing: No matter what the economy is like, people need somewhere to live. Whether they buy a home or rent a home, they need a shelter over their head. Buying real estate lets you participate in this process.
Good Returns: Stocks go up and down. They are much more speculative than homes. Property, on the other hand, always appreciates in the long run. Based on data from the Federal Housing Finance Agency House Price Index, the average annual appreciation rate of homes has gone up each year since 1985.
Many Ways To Invest: When it comes to investing in real estate, you have many options. Not only can you choose from many classes of property such as single family or commercial, but you can also choose to flip, rent, wholesale, or even participate in REIT investing.
Real Estate Protects Against Inflation: Real estate has always been a hedge against inflation. Having real estate as part of your portfolio will help as the economy improves and inflation becomes an issue.
Tax Advantages: There are many tax advantages with real estate investing that you do not get with other investments. You can take mortgage interest and deprecation deductions, as well capital gains, rental income, self-directed IRA, and tax-free property exchange tax-minimizing strategies.
No matter how you choose to invest in real estate, the market for 2017 shows every indication that it will remain strong. As you look to grow your portfolio, considering the many different investment options and strategies in real estate would be beneficial for your portfolio.