A DAY IN THE LIFE OF A REAL ESTATE INVESTOR PART #2

Rising interest rates are no reason to cease investing in real estate. It may be the catalyst to great wealth for the real estate investor. How so?

Rising interest rates tend to “cool” a market, meaning houses get purchased at a slower pace.  

In recent history, a house can be placed on the market and have 10 to 30 offers within a matter of days. Some of these offers are even higher than the asking price. 

These quick turnarounds are due to low-interest rates prompting high demand.

But when interest rates increase, the cost of purchasing and sustaining the house increases, and the ease of homeownership dissipates.

So, you may be thinking:

  • How have rising interest rates helped me as a real estate investor?
  • How are fewer buyers beneficial?
  • How does a “cooling” market create great profit opportunities for me?
  • Glenn Schworm, the co-founder of the Home Flipping Workshop, discusses investing in a time of interest rate hikes in his video, Interest Rates in 2022.

    He provides listeners with three solid tips for today’s market.

    TIP#1: RE-ACCLIMATE TO THE RISE

    Serious real estate investors don’t faint, instead, they research and learn their respective markets.

    When real estate investing is taken seriously, the investor is committed and discovers how to reacclimate to environmental changes and reap the benefits.

    Housing is a priority for Americans. Recent data reflects that people value housing above food, water, and clothing. Americans do not want to be homeless.

    As a real estate investor, it is incumbent upon you to learn your marketplace. Consider the following:

  • How have interest rate hikes affect your market?
  • Is there a particular price point in the housing market that continues to grow regardless of hikes in interest rates?
  • What market segment seems to be slowing? Historically, what percentage of buyers did this market represent to your business?
  • What’s happening in your local economy?
  • Reacclimating requires real estate investors to continue learning. They are not novices.

    Serious real estate investors are ever learning and growing. They are constantly taking classes that directly and indirectly affect their business.  

    These classes may not be formal, but lunch meetings with other investors or knowledgeable brokers, bankers, contractors, and other stakeholders in the industry who must also reacclimate.

    Therefore, reacclimate to your local market and make the necessary changes to continue profiting as a real estate investor.

    And, please, don’t faint.

    TIP #2: ARE FEWER BUYERS ARE BENEFICIAL?

    I’ll be honest. I know this doesn’t sound very smart, but hear me out.

    As a result of  rising interest rates, the market is “cooling.” Your market and house purchases are reducing, and you must ask yourself a serious question.

    Where did the buyers go?

    Basic economic theory teaches that there are sellers and buyers, and supply and demand govern their relationship.

    So, if there are always sellers and buyers, and buyers are buying less, what changed in their relationship? The answer is interest rates. 

    That’s just one thing that changed in their relationship. Sure, interest rates increased, but housing is the priority for Americans. It is their number one need.

    So, has homelessness increased drastically in your community? More than likely not.  

    Again, where did the buyers go?  

    Please understand that buyers are going to make a necessary purchase. As a real estate investor, you must know where and when they made their purchase.  

    Where are they living if the purchase is not a single-family home and housing remains the primary need?

    I’ll tell you and end this riddle – they are renting. Next question – from whom do these people rent? Wise answer – smart real estate investors who know how to thrive during market shifts..

    TIP #3: PROFITING IN THE “COOLING” MARKET

    Rising interest rates create an excellent opportunity for serious-minded real estate investors. Many investors have been frustrated with the abundance of uncommitted market investors.  

    Low-interest rates created many opportunities to invest, and hikes in housing prices covered costly mistakes. It’s been a get-out-of-jail-free card.

    Finding good deals is also tricky because many investors are fighting over the same property. 

    Troubled homeowners find themselves not so uneasy and demand far more for their dilapidated homes than is reasonable.

    Things are “cooling,” and committed real estate investors are smiling. Here’s why:

  • Rises in interest rates create a huge rental market. When borrowing money increases, many opt not to borrow and rent instead.
  • Troubled homeowners are humbled. When the battle for the fixer-upper spirals downward, these homeowners become far more amenable to reasonable offers.
  • Increase in inventory means a reduction in the purchase price. That’s right, when demand for buying decreases, so does the house cost.
  • Remember, savvy real estate investors make their money on home purchases. Therefore, as housing prices drop, you should purchase as many as possible.  

    It’s time to build your portfolio. This wealth-building strategy will guarantee your comfortable retirement and, more importantly, generational wealth.

    WHAT’S NEXT?

    A committed real estate investor is a forever student. He is constantly learning and watching.

    As a real estate student, you must ensure you understand the present time in which you invest but also look to the future and determine what may or may not be ahead.

    Every student needs a teacher. Glenn and Amber Schworm, founders of the Home Flipping Workshop, are outstanding teachers who have taken the time to build a vast network of real estate investors to help others grow in this business.

    Join them at their upcoming Home Flipping Workshop Virtual Event and learn more about this great organization and how to become a committed, savvy real estate investor.