How Long are Real Estate Prices Going to Continue to Rise

Mar 19, 2022

Real estate prices in the United States have been steadily increasing for many years. From the end of the financial recession in June 2009, to January 2018, average home prices have increased almost 111%. This increase has made it more difficult for young people to get started in the home owners journey, forcing some to rent instead. While there is always a risk involved with investing in any financial system or market, there are steps you can take to mitigate these risks and purchase a home at a reasonable price that will be worth your investment. The post discusses different strategies investors can take when purchasing property and which ones may be appropriate depending on their situation.

Strategies to Increase Profits

The easiest way to profit from real estate investments is to buy a home that has not been renovated and increase its value. They call it FLIPPING.

As a general rule, you will have to put at least 10% down on the home, and the property's value has to increase by at least 10% in order for you to break even. The amount you invest on improving the home should be a sum that gives you an estimated ROI (return on investment) of at least 20%. For example, if your real estate costs $200,000, you want at least $40,000 in profits. Most estimates suggest that renovations should be between 10-15% of the total cost of the property. The $200,000 home renovation project would require between $20,000 and $30,000 and your home would resell for $260,000 to $270,000.

There are several strategies you can take to increase the property's value: Buy on a slight downward slope. A downward slope in the market means that there has been an accumulation of sellers in alternative areas (for example, another city), but no sellers in your area of interest. In this situation, you will find it easier to negotiate a lower price for your home. This strategy is more applicable for smaller properties. In San Francisco, for example, it may be more difficult to sell your house if you’re aiming to make a profit because there is so much competition in that market space, but Sacramento Real Estate still offers opportunities.

Improve the neighborhood.

If you can’t find the perfect house in your area, you can also do something more creative. For example, you could purchase a run-down property near your area and fix it up before selling it at a higher price. Then when you're ready to buy your dream home, make sure to negotiate for lower prices because of its improved value. Buy in an emerging neighborhood. Some cities have neighborhoods where property values haven't increased much yet due to lack of infrastructure or other factors. It is possible to invest in such a neighborhood as long as there are prospects of development that will ultimately increase the value of properties in that area.

Analyze the real estate market.

In order to have a good opportunity to purchase a property that will increase in value, it is important that you analyze the real estate market. Use debt wisely. When financing a property, it is important to make sure you don’t use more than 40% of your monthly income for mortgage payments. This is because you are investing much more on the property than you are actually spending. If the property’s value increases, your profits increase as well. Take advantage of tax breaks. There are different tax deductions and credits that can be put to use when investing in real estate. These include: Be sure to choose a suitable property type that has potential for future appreciation. If a city is experiencing a strong real estate market, there are many more properties to choose from and therefore it may be difficult to maximize your ROI. In such cases, city-specific knowledge is necessary so you can find out the most suitable areas for purchase or investment purposes.