Interest rates have been on our minds for a long time now. After the Federal Reserve slashed rates by half a percentage point, property investors can surely look forward to smooth sailing. That may not be the case.
Despite our best efforts, it is nearly impossible to predict the ebb and flow of the real estate market in advance, and real estate investors should not rely on one factor to determine their success. Waiting for perfect conditions will waste months, maybe even years, of potential.
Do not wait for interest rates to be where you want them to be. Don’t set yourself up for failure by waiting for conditions that may never arrive; take advantage of them when you can. The situation is complicated by other factors.
This isn’t to say that interest rates do not matter. Yes, they do. As investors, we should not base our portfolios on factors that are beyond our control. Good credit scores and a responsible debt-to-income ratio are helpful. The difference is not always significant enough to make a significant difference in your interest rate.
Investors would be better off prioritizing what they can affect and control. Listed below are five examples.
1. The Markets We Invest In
Real estate is often referred to as a universal experience. Rarely do the things happening in “U.S. real estate” translate to every market. They reflect overall trends, not actual trends.
This makes where you invest important. There is a difference in affordability between cities and regions. Job market strength, rental demand, population growth, and long-term prospects are also important. It may be challenging for investors to navigate and learn about the variety, but they can still find something that matches their needs.
2. The People We Work With
There are many people who rely on other people in real estate, even active investors. No matter how active or passive we are, we all rely on professionals, partners, and vendors to build a stellar portfolio.
In order for passive investors to be successful, they must invest heavily in the companies they partner with. The quality of your property management team will determine your success or failure. Your advisors will either lead you to victory or lead you astray.
It is important to do your homework regardless of who you want to work with. Get answers to your questions. Check the accuracy of the information. Keep an eye out for red flags.
It is essential that your partners, including the companies you hire to provide services for you, have experience and integrity.
3. The Integrity of Our Business
Investors shouldn’t underestimate the importance of reputation. Your investing business sends a message to the world regardless of whether you represent yourself or have managers. This will determine whether residents will remain loyal and long-term or whether they will have high turnover. Preventing legal issues or causing negligence is the goal. Work with people you value.
4. The Long Game
Investors who hold their investments for a long time also risk growing short-sighted. Worrying about every market change makes us no better than day traders.
There’s no point pretending that it’s easy to ignore daily ups and downs. Nevertheless, we do not obsess over them.
Long-term thinking is the key to success for real estate investors. You’ll be fine if you focus on your goals and benchmarks and remain diligent. We live in a constantly changing market. Investing in fair-weather stocks only gets you so far, but perseverance builds wealth.
5. The Management of Risk
Lastly, investors should pay attention to risk management. This can be broken down into two parts.
Identifying risks and liabilities is the first step. The second part is to mitigate them as much as possible. To avoid losses, you need to minimize risk exposure. Throughout the buying process and after you own the property, you do this. In addition, it involves wise stewardship of your resources, including safety nets and tax planning.
Risks can’t be eliminated (and can’t be avoided), so you should prepare to absorb them.
In Conclusion
Even though they can’t control things like interest rates, investors can benefit from the opportunities provided by them. Their success shouldn’t be dependent on them, however. Focus instead on what you can influence. Set your goals, and go after them!
