We’re flooded with negative headlines about today’s real estate market. Whether it’s about record-low inventory or record historically high-interest rates, today’s media landscape paints a doom-and-gloom picture designed to elicit feelings of 2008.
Here’s a statement you’re not likely to hear: Interest rates are high and likely going up, which can mean opportunities for buyers.
Now that you’ve read and re-read that statement, the next logical question is, “How?”
At Pacific Private Money (PPM), we understand that people are always going to need to move, whatever the reason might be. And that fact doesn’t necessarily change during times of instability or exorbitance. The key is to understand that nontraditional lenders provide quick access to capital enabling you to purchase your dream property, with the flexibility to re-finance once rates come down.
That’s also good news for investors looking for alternative places to allocate their money that have a low correlation to the stock and bond market. Here’s what else investors should know:
Bypassing the Negative Media Narrative
In the world of finance, negative news tends to dominate headlines. This obsession sells, but it can also obscure the genuine opportunities that exist in the market. Despite the negative media narrative, the current economy is not in a recession. Therefore, it is essential for consumers and investors to approach financial news with caution and a discerning eye.
Investing in Real Estate vs. Real Estate Debt
In addition to not having to worry about leaky roofs or 2 a.m. phone calls, investing in real estate debt with PPM brings considerable benefits versus owning property on your own. The most significant being the safeguards put in place to protect investors. In our real estate debt funds, protective equity ensures that loans don’t exceed 70% of a property value. While the ideal scenario still means avoiding foreclosure for the borrowers, the security provides conservative safety for investors without sacrificing yields. The strategic investment in a pool of properties also insulates an investor from the financial ramifications of prolonged missed payments from tenants. Depending on where in the country a residential property is located, tenant protection laws can leave property owners “holding the bag” without opportunity for recourse. By being invested in a pool of properties, however, a percentage of missed rent amounts to a rounding error vs. financial ruin.
Tax Advantages of Real Estate Investment
As Omar Khan, Founder and Managing Partner of Boardwalk Wealth, puts it to his clients, “You don’t have a revenue problem, you have a tax problem.” Investing in real estate holds distinct tax advantages in the United States. For high-income individuals facing taxation issues, real estate investments in tax-advantaged solutions provide a avenue that keeps more of your gains in your pocket.
It starts with education – make sure you’re speaking with the right people equipped with the institutional knowledge and experience with the market.