It has been nearly a decade since the U.S. subprime mortgage crisis. After a long and painful recovery, the housing market is back on track. Sales are on the rise thanks to steady jobs growth and pent-up demand.
For investors and real estate entrepreneurs, now is the time to capitalize.
Housing Market Kicks Off 2017 in Fine Form
Both new and existing home sales rose at the start of the year despite a sizable increase in mortgage rates. The National Association of Realtors (NAR) said existing home sales rose in January to the fastest pace in almost ten years, with market conditions improving throughout much of the country.
What’s more, the average sales price on all previously-owned homes has increased in each of the past 60 months when measured in year-over-year terms.
The sale of new homes rose 3.7% in January and an additional 6.1% in February, setting new seven-month highs.
Homebuilders are also more confident now than at any time over the past 12 years. Check out what the National Association of Home Builders (NAHB) had to say about confidence levels for the month of March:
“Builders are buoyed by President Trump’s actions on regulatory reform, particularly his recent executive order to rescind or revise the waters of the U.S. rule that impacts permitting.”
And while rising mortgage rates are a cause for concern, low inventories suggest the buying frenzy will continue as more people look for homes.
In other words, demand is high and supply is low, which is an ideal situation for real estate businesses looking to expand their footprint in a highly lucrative industry.
We’ll be covering housing trends from a small business and investment perspective from time to time. Be sure to check out the Red Door Capital Group Blog for the latest updates.
Getting a Piece of the Real Estate Market
Investing in residential and commercial real estate is appealing to many business owners. For many, the prospect of passive income on appreciating property is simply too good to pass up.
Unfortunately, tighter lending constraints often limit what you can do with your real estate portfolio. That’s why the Red Door Capital Group has pulled out all the stops in helping investors tap into quality financing opportunities. Read on to learn more about our unique real estate financing solutions.
If owning your own real estate business is on your radar, the following strategies will help you get off the ground.
Buying and renting out property to tenants and businesses is one of the most attractive ways to invest in real estate.
Under this scenario, you purchase property (or land) and become the landlord. As the owner, you are responsible for paying the mortgage, taxes and maintenance of the property.
Becoming a landlord is an attractive bet in today’s market. Vacancy rates are declining across the country, as population growth and more plentiful jobs fuel demand for accommodation.
Obtaining financing for rental properties fall under the general umbrella of commercial real estate lending. Commercial real estate includes any type of building that is used for business purposes, such as:
- rental houses
- shopping centers
- business offices
Our article, A Beginner’s Guide to Commercial Real Estate Lending, explains2 the process for financing commercial real estate projects. Whether you’re looking to purchase existing property or finance a new construction project, there’s a solution out there to meet your needs.
Real Estate Trading
Real estate trading, commonly referred to as flipping, is another popular business strategy.
Real estate traders buy property with the intention of selling it a short while later. This is often done in hot markets where property values are rising quickly.
The fix and flip method is another popular form of real estate trading. Unlike pure flippers who simply sit on the property, some investors spend money on renovations and upgrades. This allows the property to be sold at a higher price.
If you’re interested in flipping real estate, location and timing are everything. Review our real estate solutions carefully to reflect on the best path forward in a hot market.
There are other indirect ways of owning a piece of the real estate market. One way is through a real estate investment group, which essentially acts like a small mutual fund from rental property.
This method is for investors and business owners who want exposure to the rental market without the work of being a landlord.
Under this setup, investors buy properties through a company that has already purchased them. The maintenance and day-to-day operations of the property are managed by the company and not the investor.
To the surprise of no one, investors have also found a way to securitize real estate, turning it into a publicly-traded asset.
A real estate investment trust (REIT) can be bought and old on the major stock exchanges.
REITs have become so successful that they are now listed as one of the 11 main sectors on the S&P 500 Index. They’re a good option for investors seeking to build a diversified real estate portfolio with steady dividend earnings.
Investing in Real Estate Offers Protection
Real estate will continue to be an attractive investment vehicle for investors seeking diversity and protection. Real estate values have appreciated significantly over the decades, even when factoring in the 2008 subprime mortgage crisis.
We all need a place to live. Real estate investors are well aware of this, and are capitalizing on the demand.
The Red Door Capital Group helps real estate investors and small businesses achieve their goals by offering turnkey solutions. To learn more about what we can do for you, contact us today.
Also don’t forget to read about out other financing options to help you build the business of your dreams.
Red Door offers cash flow solutions, cash management and merchant services, specialty financing and credit & debt services. We’re experts in helping you manage your growth and expansion. Learn more by clicking here.
National Association of Realtors (February 22, 2017). “Existing-Home Sales Jump in January.”
National Association of Home Builders (March 15, 2017). “Builder Confidence Hits 12-Year High.”
Investopedia (February 13, 2017). Real Estate Investing: A Guide