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From skyrocketing interest rates to market contractions to rising rental demand and everything in between, 2022 has been an eventful year for real estate investors across the country. It was enough to make anyone’s head spin.
But it’s a new year and I’m setting new real estate investment goals for 2023 on paper. what What are you trying to do to make your real estate investment strategy successful towards 2023? No do.
Below are three things that every experienced real estate investor should consider adding to their investment. What not to do list.
1. Do not sit on the sidelines
“Some people want it to happen, some want it to happen, some people want it to happen.” – Michael Jordan, NBA superstar
As we embark in 2023, interest rates may be longer than hoped and higher than hoped. Does that mean I should wait to jump into the next trade? No — quite the opposite, actually. Some real estate investors feel there is less competition than in years past. Changing strategies and finding new markets are great ways to stay active as affordability continues to deteriorate.
Your move could be emboldened by factors such as homebuyers pausing purchase plans out of concern about how a potential recession might affect their job security. Coupled with other market dynamics such as higher mortgage rates, it is likely that rental demand will continue into 2023.
Assuming the math makes sense, the best deal you’ll get is the one you have on hand. You can sit here and play the “what if” game until your face turns blue, but the simple fact is that no one can predict the future. So if you’re still in pencil, make a deal now. It’s all a matter of math.
Focus on relationships with trusted lenders that you know can complete the transaction. Rates may pay a little more, but the certainty of execution and action will make it the most powerful currency on the market today.
2. Don’t get burned
“Education is reading the fine print. Experience is something you don’t need.– Pete Seeger, American folksinger and social activist
As a real estate investor, you will most likely work with hard money lenders to fund some, if not all, transactions. Hard money loans are quick, flexible, and relatively easy to secure, but it’s essential to exercise due diligence and understand the details before taking out a loan.
Be sure to discuss any upfront penalties that may be lurking in the fine print. If the penalties seem excessive, stay away. Instead, try to focus on flexible upfront penalties. After all, the purpose of hard money loans is to provide short-term financing. So, if possible, avoid financing options with stiff upfront penalties that can force you to pay high interest rates over a long period of time.
Another thing to keep an eye out for is a forward rate lock, or a guarantee that the lender will honor a specific interest rate at a specific cost for a period of time. This strategy can protect you from market volatility, which is essential especially if you are financing or refinancing a long-term contract for a rental investment. Your current lender is offering variable interest rates during underwriting If so, run away immediately.
why? In environments where rates are rising, not being able to lock rates can be costly. Imagine signing up at today’s rate. A few days before the market closes, you notice that the rate fluctuates by 25-50 basis points. You can limit your debt service to a lower loan-to-value (LTV) without considering the same cash-out earnings, not to mention the impact on your monthly cash flow.
Look for lenders that offer forward rate locking for rental investment loans. This allows you to maximize your cash flow and grow your business in the current market.
3. No need to wait for the house to be cleaned up
“Circumstances change, and you must actively change with them. ” – Cleveland Browns Chief Strategy Officer Paul Depodesta
pay off the revolving debt, FICO® Score as high as possible. The FICO® Score is one of the key tools for measuring creditworthiness and accessing the funding you need to maximize your ROI. Lenders need a way to efficiently determine if they are eligible for a loan and what interest rate to offer. In most cases, they will check your girlfriend’s FICO® score before pre-screening your application and approving the loan. Now is the perfect time to start working on improving your score.
The availability of liquid funds is essential to provide flexibility. Cash on hand is invaluable in times of financial instability. There is a saying, “Cash is King”. So build up your financial resources for the opportunity to present yourself. And believe me—they present themselves.
Refrain from discretionary personal spending and consider increasing your liquidity levels and keeping cash on hand for when the right investment opportunity presents itself. Complete your transaction now and withdraw some cash. That way, if you need it in 2023, you can buy it with cash. These deals have the highest discount rate, so you can come up with a refinancing to get your shares out and increase your capital. .
final thoughts
You can build your fortune while the real estate market is down. Look at listed real estate investment trusts as an example. 2023 has all the signs of a slowing housing market with or without a recession. During times like these, distressed sellers can emerge, creating opportunities for property investors to buy at bargain prices and generate cash flow to weather the storm.
Rental vacancies and homebuying demand plummeted to all-time lows during the 2008 crash. However, some real estate investors have been able to grow their wealth exponentially by planning ahead. The years that followed were the best of all time. for real estate investment. Experts predict a far cry from the massive housing adjustments seen in 2008-2012, but arguably there will be an opportunity for this to turn around.
Conclusion? As we move into 2023, keep your eyes peeled for opportunities as they arise.
This article is provided by Kiavi
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