New Year’s real estate investing trends and predictions
As we approach the beginning of the new year, as in prior years here, I like to offer several predictions on property investing for the coming year. To begin with, look for credit markets to ease up as interest rates stabilize over the course of 2015. As the FED lessens its purchasing (monetary easing) of US backed securities throughout the coming year, a practice it had already started earlier this year, look for less of an overall credit crunch on rental property loans. In addition, with a much smaller foreclosure rate, better mortgage rules for potential lenders in place, and a banking system that is generally loathe to greater speculation in housing investments (read: mortgage backed securities), look for lenders to take the signs of the improving US economy and run with it. Ultimately, this should provide more investment opportunities and options for property investors who plan on investing in real estate in the coming year.
An improving economy’s effects on rental property
With lower oil prices, and more disposable income made available, the economy can’t help but pick up speed in 2015. With this, consumer confidence will edge up, still slowly, but definitely upwards. As the unemployment rate continues its trend of ticking downwards, even with the greater stratification between the haves and have-nots in our country, job creation will also continue to increase slowly, but demonstratively. This will result in an improved housing market overall. Already, over the past year, many cities have shown house pricing gains in the 10 to 15 percent arena. Expect much of urban and suburban US communities to continue to see this type of increase in housing appreciation in 2015. However, rural areas will continue to lag behind in growth rate.
Increased consumer confidence
As housing heats up in urban and suburban America in 2015, due to more job creation, increased consumer confidence and most importantly, the positive psychological effects of expecting to hold onto their jobs, American workers will raise their confidence level enough to come off the sidelines to start purchasing first time and move-up housing. The net effect for property investors? A mixed bag: First, the positive – greater overall capital appreciation in current market value of investor owned properties. The down-side? Look for a stalling of unit rental price increases, so prevalent over the last several years, as greater numbers of potential homeowners sat on the sidelines, and became renters. The once-super hot rental markets, while not cooling off completely, will certainly slow down, as demand lessens for rental housing over the next year.
Millennials real estate investing and partnerships
Continuing a trend that began this year, 2015 should see more and more Millenials creating partnerships amongst themselves to purchase rental property. This will be especially prevalent with rental property like a multifamily that one or more can live in at the same time, as the owners then rent out and collect investment income on open units. Standard two to four family homes represent their best buying options at the lowest cost. Financing remains in the residential domain, making mortgage loans much less expensive than commercial mortgages (for five family and over properties). In addition, they can take advantage of FHA and Fannie Mae loans at lower interest costs than standard lender financing, as well as with higher loan-to-value ratios being allowed. This can be accomplished since they will be living in at least one of the units, becoming landlord-owners.
What rental property investors should consider investing in for 2015
With the increasing capital appreciation returning to urban and suburban metro areas nationwide, interest rates remaining stable for the year, and credit becoming more readily available, property investors should consider upgrading existing properties to take full advantage of their continued appreciation. Since it will be more difficult to raise rents in the coming year to account for increased cash flows on your properties, try to make any much-needed or put-off repairs in the coming year. Look to improve more than simple maintenance items, that is. Consider renovations that will add value to your investment property, and take advantage of stable interest rates in which to finance these renovations. This should be accomplished either through refinancing existing loans, or taking out new mortgages on properties previously bought for all-cash.
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