Is now a good time to invest in real estate?
If you’re wondering whether this is the right time to invest in real estate, read on…
The world is ready to bid farewell to 2020 – and say hello to the promises of 2021, in the form of Covid-19 vaccinations, the eventual eradication of the virus, and a gradual return to a “new normal.”
The pandemic has changed nearly everything about life as we knew it, including real estate investing. I think now is an opportune time to begin investing in property – and forge ahead with optimism if you’re already an investor. If you’re weighing real estate against your 401(k), here’s why you should resolve to get into real estate in 2021.
5 Reasons to invest in real estate in 2021
1. The Buffett Indicator. Named for renowned entrepreneur Warren Buffett, the “Buffett indicator” compares the total value of the stock market to quarterly GDP, gauging whether the market is overvalued or undervalued relative to the size of the economy. As of December 23, this indicator stood at 203%. That’s 75% above historical value, strongly suggesting that the stock market is currently highly overvalued and headed for a downturn.
2. Income Options. Real estate investing offers opportunities for making large amounts of cash in a relatively short time (12 months or less) through flipping your property, or long-term passive income through rentals.
3. Buyer-Friendly Mortgage Rates. Low mortgage rates are projected to extend into at least the first half of 2021 as younger Millennials continue to purchase homes for the first time and older Millennials are trading up for more space. Inventory levels have been low but are expected to improve. These factors place us in a buyers’ market, with home sales expected to exceed 2020 levels next year.
4. Need for Rental Housing. Millennials who have purchasing power are buying, but many others in this cohort cannot afford to purchase a home. Nevertheless, they’re having families and some are working from home, leading to a need for the space of a single-family home rather than an apartment. Investors should purchase a single-family home in good school districts to attract the millennial rental market.
5. Appreciation + Depreciation. Investing in real estate – especially single-family homes – offers a blend of benefits connected to both appreciation and depreciation. Real estate property depreciates over time, but land on which the property is constructed does not. The land is a fixed cost and, by law, real estate investors are allowed to write off depreciation to reduce tax burdens on the property even though the land is increasing in value. Of course, investors who choose wisely will see their property appreciate over time, resulting in an eventual sale for profit beyond the purchase price.
If you’ve thought about real estate investing in the past and are looking for ways to diversify your investments; create passive income streams with tax advantages; or make gains through short-term investment and real estate sales, 2021 could be your optimal year to purchase a property for flip or rental. The team at Maxwell Realty can help you find the right property investment to help you meet your goals.