It is harder to invest in real estate in 2024 due to multiple factors but opportunities still exist.
| Issue | Challenge | Opportunity |
| Higher Interest Rates | High rates make it harder to cash flow regardless of property prices. | Real estate investors have historically profited from higher prices, and rates are expected to decrease over the next few years. If your property cash flows at current rates, a future refinance at a lower rate can enhance cash flow or provide funds for another property. |
| High Housing Prices | Elevated prices make it difficult to purchase profitable rentals without a substantial down payment. | While housing prices may continue to rise due to economic and inflationary factors, many existing real estate investors have still achieved significant wealth. Good deals are still available in various markets. |
| Low Inventory | Record low inventory makes it challenging to find deals. | Despite limited availability, houses, multifamily, and commercial real estate are still available for sale. Additionally, the growth of the short-term rental (STR) market can often provide more cash flow than long-term rentals, potentially turning a negative cash flow property into a positive one. |
| Tenant-Friendly Laws | Enactment of laws such as rent control, free tenant attorneys, and no-cause evictions are making it harder on landlords. | Understand your target market; many landlord-friendly areas still exist. Despite these challenges, opportunities remain for investors who can navigate them effectively. |
Strategies for Today’s Market
- Diversify Across Markets: Consider investing in different markets where real estate is more affordable and better suited to your strategy.
- Increase Down Payment: A larger down payment can ensure cash flow while still leveraging bank financing to generate double-digit returns over time.
- Explore Alternative Rental Types: Consider shifting to the STR market or multifamily properties, which often offer better cash flow than single-family rentals in expensive markets.
- Partner with Others: If you can’t afford to invest on your own, finding a partner can be a viable option. A larger down payment can make a property cash flow, and even a 30% or more down payment can turn cash flow and appreciation into double-digit returns. Many individuals are interested in investing in real estate but lack the time to find the right opportunities.
Conclusion
There is no perfect time to invest in real estate; hindsight is the only guide, and even then, it’s only clear years later. Consult a professional to develop a strategy tailored to your specific situation. Waiting rarely pays off—find a way to enter the market now. You’ll be glad you did!
Home123 Mortgage is a nationwide direct institutional lender dedicated to providing residential real estate investors with access to competitive, transparent, and reliable financing options.
Our Home123 Mortgage Counselors collaborate with investors and real estate agents to evaluate properties. We ensure they offer the necessary cash flow before you make an offer or even visit the property, saving you valuable time.
Work with one of our Mortgage Counselors and we will make finding the best program for your unique needs as simple as 1 – 2 – 3.
Case Study Examples:
- $539,000, 3 bed, 2.5 bath townhome, Temecula, CA (For sale Feb 2024)
- Can be purchased with 20% down based on target STR rates – target 15 yr IRR 31-35%
- $1.2 million 4 bed, 4 bath 3000 sq. ft home, Palm Springs, CA (Purchase Jan 2024, 38% down)
- Rents in March for positive cash flow – target 15 yr IRR 16-20%
- $1.4 million 3 bed, 2.5 bath home, Kihei, HI (For sale Feb 2024)
- Can be purchased with 25% down based on target STR rates – target 15 yr IRR 25-30%
