After the last two years of turbulence in the real estate market, we are finally starting to see things calm down. As we move from a red hot market into a lukewarm one, many people are curious about what to expect. Although the future of the real estate market is uncertain, there are a few things you can do to prepare yourself for investing in real estate in 2023.
Figure Out Your Finances
Getting your finances in order is the first step to investing in any type of real estate. It is important to evaluate your current financial situation to determine what type of investment makes sense for you. It’s best to be conservative in your estimation as the future of the real estate market remains uncertain.
You will need to factor in your current savings, assets, income and expenses and forecast how things will change by adding an investment property into the mix. Make sure you consider all costs associated with an investment property in your budget, such as a down payment, closing costs, title/settlement costs, cash flow to pay off debt, and miscellaneous expenses. You may need proof of income and debts to secure a loan, so this is also a good time to gather documents and organize the information.
Seek Out Financing
Once your personal finances are in order, it is time to find the appropriate financing. Interest rates on conventional loans are at an all time high, therefore investors should seek out alternative financing options. Private lenders and hard money lenders are great resources for alternative financing as they have more freedom and flexibility to provide a customized loan. The increasing cost to borrow is something all investors should be preparing for as finding affordable financing becomes challenging.
Keep Up With Market Trends
Profitability has always been dependent on the type of property and the location you invest in. In today’s market both factors are undeniably the most important to consider when making a decision on an investment.
In the past we’ve seen great returns on fix and flips and single family rentals, however, it will be more difficult to find profitability in those types of properties today; multifamily properties are projected to be a more stable investment this year.
While the market as a whole has softened, some locations will fare better than others as we head into 2023. Staying informed of market trends this year can help you in your search for the right investment property.
We embark on this new year in real estate with optimism, knowing that although opportunities may be harder to come by, they do exist. We encourage investors to get prepared, stay informed, and always be searching for innovative ways to keep growing a portfolio.