2020 was a crazy year for real estate and 2021 is shaping up to be more of the same. While a hot real estate market has driven prices up, this does not bode well with investors that traditionally "fix and flip" residential real estate. There is too much competition for each house to close a deal within the margins an investor needs. There are, however, plenty of ways to pivot your real estate investing plans.
1. Multi-family housing
While interest in single-family homes may be hot, fewer people are looking at real estate listings for multi-family homes. This niche real estate category includes duplexes, tri-plexes, and four-plexes. A popular investment method in multi-plex units is called B.R.R.R.R., which stands for Buy, Repair, Rent, Refinance, Repeat. The idea is to buy a unit that is undervalued due to the need for repairs, fix it up, and rent it out. This creates the potential for positive cash flow and building long-term wealth.
As an added benefit, multi-family housing with four units or less qualifies for residential mortgage lending which is currently experiencing record-low interest rates, even for real estate investors.
Another overlooked real estate investment opportunity is lakefront properties. While the residential market is seeing houses sell quickly, lakefront homes and lots are sluggish. In fact, anything that could be considered a second home or vacation home is selling at a much slower pace. The average person is not interested in the added expense of a second home during an uncertain economy. Many Americans are not looking to overextend their finances with an unnecessary purchase. Furthermore, there is an increased possibility of distressed sellers the longer the pandemic lasts.
3. Vacant rural land
Rural land and real estate ranch listings are another option for real estate investors looking to invest in 2021. Large parcels of land are traditionally slow to move, but even slower during unusual market conditions. While some investors purchase tracts of land close to suburban areas with an eye on future development, others are looking to the long game and plan on holding their purchase for years, if not decades to come.
4. Cash sale
Money talks. If you have the ability to pay in cash, you may be able to elbow other buyers out of the way in this crazy real estate market. Talk to your financial adviser to see how this option would work for you and your financial goals.
If you're ready to buy or sell property, contact local real estate services.