The world of real estate investing is always experiencing major shifts. In fact, real estate investment strategies that were once effective can become risky and unprofitable in an instant. In light of this, real estate investors have to be vigilant and up-to-date with every development in the housing market. This article will focus on some of the real estate strategies that we think will still be effective.
US Housing Market 2020: What Market Trends Can You Expect?
Before delving into the real estate strategies that you should implement, we should first go over the trends that we expect will dominate the US housing market in 2020:
1- Property prices will continue to increase
Investment property prices have been increasing for the better part of a decade. As a matter of fact, prices have soared past their peak before the recession. Experts predict that prices will continue to rise next year despite a relative cool-off in recent months. The recent CoreLogic Home Price Index Forecast projects a price increase of around 5.4% over the next 12 months.
2- Mortgage interest rates are likely to remain at their current levels
The mortgage rate is one of the most important factors in real estate investment. Changes in interest rates determine the type of real estate investing strategies that you could implement. Most observers believe that they will stay at their current levels. It’s worth noting that rates have remained relatively low amid a massive wave of refinancing. While nobody is privy to the future monetary policies of the Fed, all signs point toward a light-touch approach on interest rates.
3- Millennials will be the main driving force in the housing market
Millennials have been driving the real estate market for quite some time now. Recent data from the National Association of Realtors (NAR) has revealed that 37% of all homebuyers in 2018 were Millennials. The reasons for this shift are quite simple. Millennials have simply reached an age where they have enough income to buy a property and are increasingly opting to settle down. As more Millennials reach this age, the trend will continue to gather steam in the next few years.
4- The disparity between markets will persist
Different real estate markets are impacted by a wide range of dynamics. For example, certain markets are favorable to buyers whereas others lean toward sellers. This will probably persist for the foreseeable future as conditions will continue to vary from market to market.
Related: Will the 2020 US Housing Market Be a Seller’s Market or a Buyer’s Market?
The Top 5 Real Estate Strategies You Should Implement
Identifying the ideal real estate strategy requires a firm grasp of various aspects of the housing market. Moreover, having a clear idea about your expectations as well as your level of risk tolerance is extremely important when exploring different real estate investment strategies. Here are the top 5 real estate strategies you should consider.
1- Buy and hold real estate strategy
This is one of the best real estate investment strategies for beginners. Buy and hold requires very little effort on your part since the entire strategy is reliant on property value appreciation. There are currently several markets with high appreciation rates. Cities like Las Vegas, Phoenix, and Denver are just some of the few markets where you can implement this strategy to great effect.
Here are some of the benefits of the buy and hold real estate strategy:
- The steady and consistent increase in value makes it one of the most effective wealth-building strategies
- You can still generate positive cash flow through rental income
- Investing for appreciation is a very effective hedge against inflation
- This strategy offers various tax benefits
2- Fix and flip real estate strategy
This is one of the few real estate strategies that are effective in any market condition. Fix and flip is predicated on identifying distressed investment properties that are selling for below market value. The new owner would then fix up the property before selling it for a profit. Needless to say, this strategy requires quite a bit of experience in real estate.
Here are the main advantages of a fix and flip:
- The prices of distressed properties are low
- Getting financing for these investment properties is relatively easy
- You can make a profit very quickly
- The process of fixing up a house can be fun and rewarding
Related: How to Find Property to Flip: 4 Steps to Making a Profit
3- Real estate wholesaling strategy
Contrary to popular misconception, this creative real estate investing strategy is significantly different from a fix and flip. House wholesaling involves putting a distressed property under contract with the intent of transferring it to another investor. In a wholesale deal, the real estate investor neither fixes nor sells the property. This strategy falls in the category of short term real estate strategies and it is effective regardless of market trends.
Let’s look at the advantages of real estate wholesaling:
- This strategy does not require any cash investment
- It is perfectly suited for novice real estate investors
- Wholesaling saves you the hassle of managing a rental property
- It is one of the fastest methods to earn a profit in real estate
4- Traditional rental strategy
Investing in rental properties will always be a viable strategy. In fact, traditional investment properties are still the best way to generate consistent income. As long as you do proper investment property analysis and ensure that your rental income is higher than expenses, you will be able to generate positive cash flow fairly quickly.
Here are the pros of traditional rental real estate strategies:
- The income that this strategy generates is consistent and reliable
- You can use the extra cash flow for other real estate investments
- Traditional rental properties are eligible for a number of tax deductions
- It’s easy to get financing for this type of investment property
5- Airbnb real estate investing strategy
With the continuous growth of platforms like Airbnb, short term rentals are here to stay. Properties that are listed on Airbnb are rented out for short periods of time and are completely furnished. The success of this strategy depends on various factors, such as location and marketing efforts.
Here are the main reasons why you should consider implementing short term rental real estate strategies:
- Short term rentals generate higher rental income than traditional investment properties
- You can use the investment property as a second home whenever you want
- Short term tenants rarely cause issues for landlords
- You get to control and maintain your rental property multiple times throughout the year
Find out how much your property can earn on Airbnb by using our Airbnb calculator.
Learn more about why real estate rental investment strategies make for some of the best strategies by watching the video below:
The Bottom Line
Despite major changes in the housing market, the basic fundamentals of how to invest in real estate remains the same. Sticking to proven and tested real estate strategies that can yield decent results regardless of market trends is the safest bet heading into the future. In any event, you can start looking for investment properties right now using the Mashvisor Property Finder!