For IT professionals looking to expand their horizons and generate passive income, there are a lot of investment vehicles available to you. Historically, real estate investing provides one of the highest returns on investment (ROI) you’ll find. As we continue to move through 2020, real estate remains a solid investment choice and can provide you and your family with a passive revenue stream that offers life-changing results.
Often, potential investors worry about investing in real estate because of the belief that the market is too volatile. While it’s true that there are good times and bad times to buy or sell, the fluctuations in the real estate market are, mostly, predictable. Unlike other forms of investing, once you get a handle on the real estate market, you’ll learn to read the fluctuations and discern for yourself the right time to buy or sell.
4 Surprising Reasons Real Estate Investing Is the Best Bet for 2020
1. Long-Term Financial Stability
Long-term financial security is a great benefit to real estate investing. Property holds its value well. While there is no guarantee that its value will increase indefinitely, with thorough research on the location and other aspects of the property, you can make informed investments that are likely to benefit you long term.
On top of its appreciating value, if you are renting the proerty, cash flow is another perk of your investment. Cash flow is the profit left over, after paying all expenses involved with the property. Cash flow creates safety, opportunity, and—above all—freedom. It is a major factor in both your short-term and long-term financial stability.
2. Lack of Affordability Doesn’t Define the Entire Market
Over the past year or two, you may have noticed journalists reporting on affordability issues in the US housing market. While there are some areas in which affordability can be an issue, these are small, isolated pockets throughout the country and in no way describe the overall climate of home sales.
For example, real estate prices in San Francisco have been skyrocketing because of the massive influx of tech businesses and the jobs they create, making it extremely expensive to buy a home there. However, there are hundreds of thousands of homes in the surrounding areas that make for ripe investment opportunities. Just because housing prices are going up in one specific area does not indicate that it’s happening everywhere.
3. Interest Rates Are Expected to Remain Low
Experts are predicting that interest rates will continue to be relatively low throughout 2020 and should be around 4% throughout 2020. Low interest rates like this make it much easier for IT professionals without a lot of investment capital to take part in real estate investing through mortgages.
The ability to invest without using cash only is one of the things that makes real estate so accessible. To buy an investment property using 100% cash is hard for almost anyone but can be a particularly difficult obstacle for beginners. However, thanks to the low interest rates, you won’t have to worry about how to make money investing in real estate if you don’t have adequate cash reserves to begin investing. You can make up the difference with an affordable mortgage.
4. The Market Is Transforming
Housing in the US has been described as a “seller’s market” for years now, and it isn’t expected to make an abrupt about-face in 2020. However, the slow transition into a “buyer’s market” started in 2019 and is expected to continue for several years. The factors influencing this change include the stabilizing of inventory, a slowdown in appreciation, and low mortgage interest rates.
Remember how we said there’s the right time to buy and the right time to sell? Well, the market as a whole is moving into a phase in which it will be the “right time to buy” in 2020. This change is an important factor for beginner real estate investors who won’t be engaging in bidding wars with other homebuyers.
What Is a Seller’s Market?
A seller’s market is one where there is more demand from buyers than there are homes available for sale. During these periods, home pricing tends to be higher, and the situation is more attractive for sellers.
What Is a Buyer’s Market?
A buyer’s market is the opposite of a seller’s market. It’s a market in which there are fewer buyers than there are homes available, resulting in a downward trend in home prices.
Why Are They Important?
Depending on the type of real estate investing you’re looking to get into, you’ll want to know whether the current climate is regarded as a buyer’s market or a seller’s market. For example, if you’re intending to buy a house to use as an income property, you’ll want to make your purchase(s) during periods when there’s a buyer’s market.
For those interested in flipping homes, that is, buying a home with the intent of fixing it up and then reselling it, the state of the market is equally important. Generally speaking, the best time to buy the homes you want to sell will be while prices are lower during a buyer’s market. But, when you want to sell your homes, you may want to wait for a seller’s market to come back around again.
Strike While the Iron Is Hot
Real estate investing has been proven time and time again to be an effective way to generate passive income and begin creating wealth. While the market tends to fluctuate up and down, 2020 is expected to be an excellent time to buy. Housing prices are expected to continue to rise, though the rate is slowing, making 2020 an even better year than 2019 to start investing.
With interest rates expected to remain relatively low, 2020 is the perfect time to buy if you lack sufficient startup capital to buy a property using cash alone. The rates may not be as low in the following years, so if you’ve been waiting for the “right time” to invest, 2020 is it. What are you waiting for?