- Michala Costello
2022: The Year Of The Investor Buyer
This is an Op-Ed piece our Cheif Evangelist of Compass, Leonard Steinberg, wrote for 2022. His predictions of the market are usually pretty accurate but agree that real estate is all about long-term investments. From touring neighborhoods to crunching numbers, putting together financers with developers, our team loves working with investors.
A good chunk of the supply-demand imbalances we witnessed in 2021 were partly fueled by a massive surge in all-cash investor buyers, small, medium, large, and ULTRA-large. I see this trend expanding in 2022 for the following reasons:
1. Rising sales prices are just one part of the equation: equally robust rising rents are fueling much better returns on investment. In a low-interest rate environment that is attractive. In a rising interest rate environment, one can be certain rising rates are a result of a robust economy that fuels employment and occupancy levels.
2. Many tax laws that benefit real estate that was in jeopardy in 2021, appear to be safe moving forward. The many tax advantages of investing in real estate include 1031 exchanges, depreciation, long-term capital gain, etc.
3. With so many people still having trouble committing to one city for the long term, there will always be a strong market for tenants.
4. As interest rates rise, affordability - especially for first-time homebuyers - will become even worse. And all-cash buyers will have even more power.
5. Many homebuyers may feel markets are overheated and due for a correction, thereby encouraging them to rent while they 'wait and see'.
6. Those who have re-located to low-tax states to save some bucks - often big bucks - will miss their 'home towns' and all they offer that is difficult to replicate elsewhere. Instead of owning they may choose to rent in their hometowns and use those properties less than 182 days of the year. By renting they may make local tax collectors believe they have truly relocated. Big bucks renters may be a growing tenant segment, especially in full-service buildings with hotel-like amenities.
7. Inflation always drives investors to bricks. Real estate is mostly an outstanding hedge against inflation. Even when inflation is 2%, compounded over 10 years that escalation is around 22%. Maybe not a big wealth creator, but certainly a great wealth preserver....something many investors are seeking now when equities are at all-time highs.
8. Investment real estate will always have FOUR primary benefits - income, long-term capital gain, tax benefits, and inflation hedge - which when COMBINED make for a very attractive investment.
Whether you are a first time investor, a flipper or looking into larger development or multi-units we are here to help you pull the pieces together. Reach out today to start learning about neighborhoods and market trends to find the investment that is right for you!