The Future of Real Estate

Posted On May 15, 2019
Posted By Renatus

              Demand will always be the driving force behind real estate.  If there are more homes available than buyers, it will be a buyer’s market.  If there are more buyers than there are homes, it will be a seller’s market.  So, what drives demand?  Population growth has an impact on demand as those individuals will need housing, but one of the biggest factors in demand is affordability.

              The ability to pay for a house on a month to month basis drives the purchasing decision of a buyer more so than the list price of the home.  As interest rates rise the monthly payments rise and thus it starts to hinder individuals from qualifying for loans.  That affects those trying to sell their homes and move into their second homes, those in a second home from moving to a third, and on up to the top end luxury home market.  When that happens, there is a correction in the market which is what investors want in a real estate market. As the market goes up or down that creates opportunity for a savvy real estate investor to get more wholesale deals.  It also means they deal less with increasing material prices for fix and flips and frees up labor forces so they can get workers in fix and flips to finish them in a timely manner.

              One of the great things about real estate is it helps investors become recession proof when they buy and hold real estate.  Rents tend to follow inflation and so while mortgage payments stay consistent through the term of the loan, rents tend to increase.  As the mortgage gets paid off the cashflow increases such that even if rents go down the property still gives cashflow.

              Bob Snyder, CEO of Renatus, goes over this topic in his generally speaking video here.