In the past few years, real estate investing has become more popular across the United States. Real estate investing has always been a viable financial strategy, but throughout the 2010s and 2020, it’s become commonplace. On top of that, real estate investors themselves are investing more heavily in real estate—sometimes exclusively.
What accounts for this surge in real estate investing popularity?
One factor is the sheer strategic flexibility offered by real estate investing. Unlike other financial strategies, there are many ways to approach real estate, and many ways to incorporate it into an investment portfolio.
For example, if you’re interested in short-term profitability or a fast turnaround and you’re willing to put in the work, you could purchase distressed homes, fix them up, and flip them for a profit. If you want more long-term gains, you could invest in property in an up-and-coming neighborhood, or purchase land to develop in the future. Otherwise, you could invest in residential rental properties and generate consistent cash flow—or you could invest in commercial real estate and focus on business needs.
This versatility makes real estate broadly appealing; many different types of investors can find something they like in the real estate world. Accordingly, the potential market for real estate is enormous and continually growing.
Helpful Resource Availability
There is also an increasing abundance of helpful resources available for prospective investors. People who are new to the real estate world can easily find a variety of blogs, whitepapers, eBooks, YouTube videos, and full-fledged courses meant to educate newbies on the basics of real estate investing. It’s also trivially easy to tap into forums and online communities where real estate investors share tips and support each other.
Even more importantly, there are more property management companies available to assist landlords in managing their rental properties. These companies provide services like rent collection, tenant screening, and property maintenance and repair—meaning landlords have fewer responsibilities and can manage properties in remote areas.
Stock Market Fears
We’ve also seen increasing volatility in the stock market. Ordinarily, the stock market is treated as a safe and reliable investment; historically, the S&P 500 index has demonstrated impressive returns for long-term holders. However, recent market dynamics have been more questionable. In the wake of the COVID-19 pandemic, the market crashed and rebounded, and the economic policies of the United States in response to the pandemic have spurred further growth during the ongoing crisis.
Accordingly, many investors are afraid of another, even bigger crash to come—or at least, volatility that interferes with stock investments. Properties serve as a valuable alternative to the stock market.
Low Interest Rates
While they’ve increased slightly in the past month, mortgage interest rates remain extremely low. Federal Reserve interest rates are low, which allows banks to offer lower rates to consumers. It’s not uncommon to find interest rates of as little as 3 percent.
This serves as an incentive to buy properties; investors and homeowners can afford to borrow more money, since the low interest rate results in lower monthly payments as well as less interest paid total over the duration of the loan.
Additionally, the COVID-19 pandemic dramatically reshaped the average workspace. Nearly every business that could afford to allow employees to work from home has—and many of those businesses have decided to operate fully remotely indefinitely. In other words, millions of people are now working from home permanently.
This grants significant flexibility to the majority of the working population. If you can live anywhere, you may choose to invest in a home in an inexpensive area of the country. Alternatively, you could move to an area with many promising real estate investment opportunities.
Despite great buying conditions, there are still plenty of good deals to find on the market. Throughout the country, people are considering moving—because they want to move to a less expensive area or because they’re no longer able to afford their current home, or because of other pressures. Thanks to these factors, inventory remains reasonable, and savvy investors can sniff out great opportunities.
Demand for Rental Properties
Additionally, demand for rental properties is high. Millions of people in the United States are facing uncertainty; they’re not sure whether they want to remain in this location, they’re not sure whether their job will remain stable, and they’re not sure if now is the right time to buy a house. Accordingly, they’re sticking with renting, rather than owning—which is perfect for rental property investors.
There are many independent factors for the popularity of real estate investing, merging together to create these economic conditions. Things may changes as the COVID-19 pandemic begins to decline, but for the foreseeable future, this popularity looks to remain consistent.