If you currently invest in real estate or have plans to do so in the future, it’s essential to understand its risks. Now, we’re in a seller’s market, which means fewer homes are for sale, prices exceed list prices, and fewer incentives from sellers. Be sure to keep these four tips in mind if you plan to invest in real estate in the near future:
Home values may decrease– Home prices continue to rise, but no one can predict what will happen to the housing market. Therefore, if you’d like to invest in selling within a specific period, consider the risks of a short-term real estate investment since home prices may fall and take a toll on your plans.
Overpaying is easy- Many people are looking to buy properties. If you know a property has received several offers, you may spend more. By understanding the maximum price you want to spend, you can avoid paying more than a property’s market value.
It can be challenging to find suitable properties- A seller’s market means low supply, and it may take a while to find an investment property or multiple properties that check off all your boxes. You may have to settle for a less-than-ideal property for your needs.
Consider the alternatives- No one has a crystal ball that can predict whether the housing bubble will burst. While you can invest your money in property now and hope that property values continue to go up, you may also want to consider holding off and using other strategies to diversify your portfolio. Here are some options to consider after consulting your financial professional:
REITs: REITs or real estate investment trusts are companies that invest in income-producing real estate. To generate income, you can buy publicly traded REIT shares, a REIT fund on stock exchanges, or private REITs.
Consult your Financial Professional
A financial professional can help you determine if now is an appropriate time to invest in real estate in the current market based on your financial situation.
Disclosure: Specific-sector investing such as real estate can be subject to different and greater risks than more diversified investments. Declines in the value of real estate, economic conditions, property taxes, tax laws, and interest rates all present potential risks to real estate investments.