It may be strange for me (a person who does not surf) to use a surfing metaphor, but I believe 2016 can easily be compared to surfing. Experienced surfers like the challenge, they like the big wave and the excitement of the longer ride that the large surf can provide. The inexperienced needs to either continue to practice or they miss the big wave.
The real estate investing market is very similar
As the economy changes within investing the easy deals are gone and to find an investment takes extra care and diligence (but they are still there). Many less experienced investors lose optimism and believe they cannot invest. The experienced investors actually like this kind of market as there is now less competition out there. They understand that real estate investing is and always will be about investing in the best locations. The question they ask themselves is where today is the best location to invest that will let them ride the economic wave of prosperity for the longest most enjoyable ride.
2016 Investments Outlook
Buy and Hold Investing In Undervalued Markets
Undervalued markets can sustainably create market surge and therefore is the focus of serious investors. There is indeed a proven need for housing with increased generational family units and population growth. Seasoned investors are searching for markets that are more affordable and that create the ability for the longest lasting surge in upward pricing.
Median Income and Median Priced Homes
Markets where the median income can pay for the median priced home with only 33% of the median income being used for housing is considered average. Markets such as Atlanta, Indianapolis, Kansas City, Philly, etc. where you can purchase a median priced home for only around 20% to 25% of the area’s median income create this sustainable market surge.
New Construction Investing
New construction investing joins the ranks of investment vehicles. With a short supply and large demand for housing, new construction builders have stood up and taken notice. They too have identified that the largest demand for rentals is in the single family home category and they have created new construction property designed for this specific market. They both rent the properties and play landlord themselves or they sell the properties to investors to create a great long lasting investment.
Fix and Flips
This may not be suited very well for people new to the investor fix and flip category. With tighter inventory and rising prices, having a proven and very well-tuned business model will be a necessity to win in this investment class. Those seasoned to this model will always do well as this is indeed a model where you get better with experience. With fewer properties and less competition, the serious will be able to thrive.
Baby Boomers and Millennials
You as a landlord will want to understand the wants and needs of this group of people as they are your tenants for the foreseeable future. Interesting enough, their wants in housing are not all that dissimilar. Their approach to renting and their reasons for what they want are very different and as a landlord you will indeed want to know their wants, needs and their whys.
Distressed and Foreclosed Sales Have An Uptick
Depending on what states you look in, you may see a slight increase in this activity. Typically banks release these to the market at a pace which will allow for maximum prices. Judicious states such as Florida, South Carolina, Louisiana, Oklahoma, Kansas, North Dakota Wisconsin, Illinois, Indiana, Kentucky, Ohio, Pennsylvania, New York, etc. have been creating a backlog of foreclosures which will be coming due and in these states you may see more of this distressed activity being released.