What are the most important factors in real estate investing today?
We all know that real estate is an essential investment for all of our portfolios. We all know that it has been one of the best investments over the past couple of years, as well as throughout history.
Still, we all want to invest wisely, safely, and profitably. So, what factors should investors be watching and looking for?
Supply & Demand Balance
Real estate, investing and business, in general, are all about supply and demand. There is currently incredible demand for real estate. Analysts aren’t expecting that to change soon. On the retail side, apparent shortages in inventory are supporting higher prices for both asset purchases and rents. Though if you have the connections, relationships and know where to look, there are deals too. That’s true whether you are interested in private lending, or are searching for the best real estate investments in NJ.
Recently the media has been consumed with fear of inflation. In real estate inflation is a great thing. It means your asset values and cash flow are going up. Real estate has continually proven to go up in line with, or faster than inflation.
Leverage helps investors to both scales to take advantage of opportunities and optimize for the upside, as well as to minimize and spread risk.
Financing is one of the most obvious types of leverage in real estate investing. Though for those that don’t want to personally take on large amounts of debt there are partnerships and real estate investment funds that offer the same benefits.
It’s not about the price. It’s about the value. Prices change all the time. What is important is their relevance in the current market and when you are expecting to sell. Cheap isn’t always better. Nor is splurging on overpriced luxury items. Look at the value of the investment and the returns. If it is going to return you what you want, then the price is pretty irrelevant.
An opportunity is only as good as the execution. Even the most promising and high-potential deals can quickly become a total bust with poor management. In the reverse, even mediocre deals can become huge winners with great management.
This applies to fund management, daily property management, and contractors. Look for managers with long-term experience and relationships to get the most out of investment opportunities.
Getting in is easy when you make your money and know what your net returns are is when you exit. Liquidity in markets is key to exits, as well as enabling multiple exit strategies. The more exit options you have, the more secure your position, and the better the upside potential.