The real estate investment industry has been a roller coaster of a few years, and 2023 was no exception. The record cheap borrowing rates, the soaring rents, and the enormous appreciating gains came first. Then, growing interest rates, significant inflation, and persistent recession rumors confronted homeowners.
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You’re not alone if your mind is racing. In the end, though, is investing in rental property still a wise choice in 2024?
Belong gathered data and analysis on the present rental property market from many sources, as well as Belong’s own internal insights, to determine the possible hazards and benefits of the rental market in 2024. This was done in June 2023 and may have happened in November 2023.
Learn about Belong PRO: By joining the Belong network, you can take the uncertainty out of your cash flow with guaranteed rent, round-the-clock assistance, and more.
In 2024, what are the possible benefits of the real estate market?
In every community in the United States, there are several “housing markets,” not just one. A good deal in Salt Lake City is not the same as one in Seattle. Certain cities have constant demand, while others experience variations according to supply and demand.
Therefore, will it be wise to purchase a new investment property in 2024? The answer is always going to be specific to you and the properties you are thinking about. Having said that, the following is a list of six possible benefits, or “pros,” of real estate investing in 2024.
1. Rental properties are an inflation hedge
As inflation increases, rentals also rise. Purchasing real estate is frequently referred to as a “hedge against inflation.” This is due to the fact that while interest payments on a fixed-rate mortgage will not change, your rental income may do so over time. In addition, you will be increasing your home’s equity and will eventually profit from both inflation and appreciation.
2. There is precedent for property values to rise following economic downturns.
The value of most homes has increased by double digits in recent years due to the explosive growth in housing appreciation. Of course, there’s always the chance of a sudden and severe economic slump. Thankfully, following economic downturns, real estate values often rise again. This implies that even if there is a chance that prices could drop in the near future, if you are investing for the long term, you can anticipate that your property’s value will increase over time.
3. Compared to the stock market, single-family houses are less erratic
Roofstock data indicates that the average yearly returns on rental single-family houses are superior to bond returns and on par with stock market returns, but they are also far less volatile. Additionally, they argue that single-family houses and the stock market do not correlate as investments, suggesting that real estate might be a useful tool for portfolio diversification.
To optimize profits, real estate investing takes meticulous preparation and expertise, just like investing in stocks. There is a learning curve that many novice investors must overcome, but you have the chance to discover what works best for your own financial objectives and expand on it. We can make your journey and financial success easier if you’re just starting out or have inherited a house, since our Belong PRO team specializes in working with first-time rental owners.
4. Affordability is driving up demand for rentals.
Even though home prices are down in many locations, many Americans still cannot afford them. Home prices are expected to continue growing in 2024, according to many research organizations, despite pricing slumps in several cities throughout 2023, as reported by CNBC. This is only a result of there not being enough housing to satisfy demand.
There will always be a demand for housing, and because fewer Americans are able to purchase their own houses, well-thought-out rental properties in desirable locations may draw in long-term tenants with low vacancy rates.
5. Tax advantages and write-offs are associated with rental charges
One of the main benefits of having a rental property is tax write-offs. The IRS lists rental expenses that you may write off on your tax return, such as property tax, mortgage interest, and running costs including depreciation, maintenance, and property management fees. To optimize your claim, you can even write off the expense of employing an accountant or tax specialist.
6. Managing a rental property is now simpler than ever thanks to technology.
There have only ever been two alternatives for maintaining a rental property: either employ a property manager, which can provide its own set of issues, or manage it yourself, which is quite labor-intensive.
However, after falling behind, technology is now catching up and revolutionizing the management of rental properties. Because the true potential of contemporary technology lies in its ability to totally transform the renting experience.
Belong accomplishes precisely that by fusing human intelligence with industry-breaking technology to make renting enjoyable for both landowners and their tenants. From assured rent and round-the-clock customer support to creative financing alternatives,
What possible dangers may the real estate industry face in 2024?
What are the dangers associated with purchasing a rental property in 2024, now that we have discussed the possible benefits? Once more, this will differ based on your individual circumstances and the area in which you choose to make investments. However, the following list of six risk factors should be taken into account in 2024 before purchasing a rental property.
1. Not every real estate investment generates revenue passively
Tenant property ownership isn’t necessarily a low-risk investment. If you are the property manager and tenant finder, you will have a lot of work ahead of you in terms of tenant communication, employing (and paying more and more for) maintenance staff to address problems, and finding new tenants each time an existing tenant decides to move out.
2. Finding appropriate investment opportunities is becoming more challenging due to low inventory.
In times of high demand, many cities turn into seller’s marketplaces. You’re in a great place if you already own a rental home. However, the increased competition will short-term negatively impact your rental income flow if you’re trying to get into the market.
3. It’s expected that interest rates will stay high.
Considering how expensive houses are now, financing a rental property investment may be challenging if the interest rate is more than 7%. In 2024, is there going to be any relief? Perhaps, but not until the second part of the year, per a report from CBS Money Watch.
