What Investors Must Do To Survive And Thrive In This Market

When people consider taking the leap to start investing in real estate, one question always persists: is now the right time to start investing? The longer this question looms in an investor’s mind, the harder the proposition becomes. The short answer is yes. It is always the right time to invest in real estate. In terms of an asset class, real estate tends to appreciate over time and provides investors with income that can lead to generational wealth. 

To be frank, more people should be investing in real estate, but it takes planning, hard work, execution, and a little bit of luck. Most savvy real estate investors all have stories that include roadblocks and obstacles to their success, but they found a way to maneuver through the industry to still be thriving today. 

Some investors give up too easily when something goes wrong or if the current environment isn’t as easy to navigate as they’re used to. Success doesn’t come easy, but these tips to navigate the market and find success may instill some confidence in investors that are looking to start investing or investors that are considering moving on to a different venture. There has been a lot of discussion regarding the current state of the market, and a lot of panic from investors has ensued. Interest rates have increased, which brings challenges into play, but with the right tools and guidance, there are still plenty of opportunities for success.

Increases in Interest Rates Create Opportunities

Let’s start with a topic on most people’s minds when it comes to real estate investing lately: interest rates. 

Interest rates, inflation, and a potential recession dominated the headlines in 2022. However, plenty of investors across the country still had a very successful year of business. The rise in interest rates discouraged numerous investors, lowering competition and making it easier to find deals. 

Interest rates are always a hot topic, and any changes to them tend to make investors nervous. Usually, this stems from a lack of knowledge about the financial industry as a whole. Although rates were extremely low at the beginning of 2022, they have quickly risen to the 5-7% percent range. 

According to Freddie Mac data, interest rates reached their highest point in modern history in 1981, when the annual average was 16.63%. The 1980s were not the best time to borrow money, but investors were still figuring out how to make it work. If people were successful back then, you should be able to find success now. 

“A 5.5% 30-year fixed mortgage is modest compared to average yearly interest rates since 1975. Smart investors know that real estate is a long-term investment and that today’s rates are still historically low. Expect rising interest rates. As of this writing, there’s no end in sight to our astronomical inflation rate. In a few years, buying now may seem prudent,” writes Marco Santarelli from Norada Real Estate Investments.

Rising rates have also affected affordability. Price drops are occurring for the first time in several years. This is important for you to take advantage of and build a strategy around. With prices dropping and investors leaving the industry out of fear, now is the time to strike while the iron is hot. 

Investor Attributes That Can Weather Any Storm

Planning and patience are also two things you’ll need to start investing in real estate. 

Instead of “when and where,” think “where and what.” Ask yourself what markets you’ll be investing in and what strategies you will deploy.  

Depending on the market, an investor has to change the way they think about their strategy to achieve success. There are plenty of cities around the U.S., such as Atlanta, Cleveland, and Nashville, where the suburbs are exploding with growth. 

In terms of strategy, what’s working right now is:

• Long-term rentals
• Ground-up construction
• Short-term rentals (depending on location)

Patience needs to be kept in mind, especially now. Real estate investing is known as a “get rich slow” industry. There is no overnight success or proven pathway that every investor has to follow. Rather, it’s patience and persistence that lead many investors to successful careers. Not every deal is going to close, not every property is going to make an abundance of money or cash flow, and investors will definitely consider calling it quits a time or two. However, success is out there, and it’s attainable for the people that work hard and stick with it. Just when you think you’re out of time, a property comes along that vastly changes a portfolio and gives the investor the spark they need to continue their real estate investing journey.

Preparation and Knowledge Breeds Results

A large piece of the puzzle when starting your real estate career is education. It’s a good time to start investing in real estate, but don’t measure success by whether you have a property in your portfolio by tomorrow or not. Find small victories and build on that day by day. Take advantage of the educational opportunities out there and learn something new each day. There are a bunch of local REIAs (real estate investment associations) to join where the community is supportive, and investors can find people that can be crucial to their success in the real estate investment space. 

Online courses and YouTube is always an amazing resource. On top of education, investors must be tapped into social media. Any sources that can provide an investor with tips, tricks, or breaking news are vital. 

If investors are always seeking knowledge, they’re more prepared. This education lends itself to noticing market trends, realizing when times will get tougher, and what other top investors are doing to navigate the tougher times in the industry.

Finally, finding a mentor is critical. Having someone to talk to for advice, problem-solving, or simply venting about trials and tribulations can be extremely helpful for both new and veteran investors.

Final Thoughts

The time to start investing in real estate is now. There is less competition, many avenues to success, and an abundance of resources out there for investors to take advantage of. 

Don’t let rising rates and a lack of experience get in the way. Again, expectations must be tempered, and success cannot be determined right off the bat. But with the right strategies, tools, and mindset, success will come.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.