Why Property Investing Is Becoming a New Trend

Share

Have you noticed friends, neighbors, or family members purchasing rental property in the recent past? Chances are good that at least one person you know is investing in property. That’s because property investing is becoming more popular (and more profitable). But why is this the case? And is this a good time to jump on the bandwagon?

The Value of Property Investing

First, let’s talk about the hypothetical value of property investing. Investing in real estate is one of the best ways to allocate your excess capital. Real estate has a long history of economic growth, allowing people to snowball their wealth after just a few years. Depending on the market you choose, you could see an impressive ROI due to property appreciation after just a few years.

Most commonly, people invest in property so they can rent it to tenants. In this arrangement, you’re going to collect rent in excess of what you’re paying in ongoing monthly expenses, ultimately resulting in positive cashflow. In other words, you’re going to make money every month that your property remains occupied – all while also capitalizing on property appreciation in the long term.

You can also leverage the services of a property management firm to minimize the amount of time and effort you need to spend on the property. Property managers are responsible for collecting rent, finding new tenants, screening tenants, taking care of maintenance and repairs, and a variety of other tasks. 

In exchange for a small percentage of your gross rent, you can essentially make your rental property hands-free.

Why Is Property Investing Trending?

It makes sense why property investing is popular, but why has there been such an explosion in popularity in recent years?

There are several possible explanations:

  •       Low interest rates. Though recently interest rates have risen slightly, mortgage interest rates remain near all-time lows. This presents a few important financial advantages; first, borrowers end up spending less money on interest in the long term. Second, borrowers have lower monthly payments, making property acquisition a more compelling prospect.
  •       Shrinking inventory. New construction has slowed, yet demand for housing is increasing, leading to shrinking inventory. This has increased demand for rental properties, and has made anyone interested in purchasing investment property more motivated to act quickly.
  •       Interest in passive income. We’ve also seen increasing interest in passive income in the past several years, and managing rental property is one of the best examples of a passive income strategy. People are also more frequently investing in dividend stocks, picking up side gigs, and starting blogs.
  •       Optimism for the future. The past few years have been marred by pandemics, catastrophes, and negative outcomes – and yet, the economy has remained relatively strong. This has made people optimistic for the future, and more willing to make long-term investments.
  •       Market volatility. We should also acknowledge some volatility in the stock market, which has historically been one of the most popular choices for investing. Because real estate serves as an excellent complementary investment to stock investing, more people are getting involved.

Is Now a Good Time?

So is now a good time to join the trend and start investing in real estate?

  •       Competition. You’ve likely noticed that housing prices have increased significantly in recent years. This is partially due to some of the factors listed above, such as lower interest rates and shrinking inventory raising demand while lowering supply. The truth is, competition for buying properties is about as hot as it’s ever been. That means you’re going to have to bid a much higher price to get the property you want, and there’s still no guarantee that you’re going to get it. This makes it exceptionally difficult for new property investors to get started, and it means you’ll have a harder time charging rent in excess of your monthly expenses.
  •       Real estate fluctuations. We also need to acknowledge that the real estate market is subject to fluctuations; There’s no guarantee that prices are going to rise in a straight line, forever. In fact, some experts speculate that we may currently be in an overvalued real estate environment. In other words, prices may be unnaturally high, which suggests they could eventually come crashing down, resulting in losses for some investors.
  •       Local variance. Though investing in real estate is a promising idea overall, not all areas offer the same opportunities or advantages. Some areas are overpriced. Some areas don’t have enough renter demand. You’ll need to do your research before making a decision to buy in your local area.

It’s undoubtedly true that rental property investment is increasing in popularity, and will likely increase in popularity further in the coming years. Unfortunately, it’s hard to say whether this is the right investment for you. That all depends on your current available capital, your risk tolerance, your personal goals, and the location you’re interested in.

 

Speak Your Mind