TAMPA, Fla. – A recent report is unpacking the impacts of rising homeowners insurance costs in Florida. 

According to a new report from online realtor Redfin, nearly three-quarters (70.3%) of Florida homeowners say they or the area they live in have been affected by rising home insurance costs or changes in coverage (e.g., their insurer dropped them) in the past year. This compares with less than half (44.6%) of homeowners nationwide.

The report is based on a Redfin-commissioned survey in February of this year. The survey was fielded to 2,995 U.S. homeowners and renters.

“Insurance is top of mind for homeowners in Florida and California because those states are the epicenters of the insurance housing crisis,” Kenneth Applewhaite explained in an April 17 news release. 

Applewhaite elaborated that many homeowners have seen their premiums skyrocket, and some have lost coverage altogether because intensifying natural disaster risk has prompted many insurers to stop doing business in Florida and California. 

In the Sunshine State, 11 insurers have liquidated amid growing flood and storm risk,” he wrote. 

Mounting insurance costs and natural disasters are prompting some people to relocate. According to Redfin, in Florida, 11.9% of survey respondents who plan to move in the next year cited rising insurance costs as a reason — roughly twice the national share of 6.2%. 

But while some people are leaving disaster-prone areas, there are still more people moving in than out, a separate Redfin analysis found.

Homeowners living in areas where insurance premiums are surging are at risk of seeing their properties gain less value than homeowners in areas with stable premiums — and in some cases, they may even lose money,” said Redfin Chief Economist Daryl Fairweather. “Homes with low disaster risk and low insurance costs will likely become increasingly popular, and thus more valuable, as the dangers of climate change intensify.”

Condo prices in some parts of Florida have already started to fall amid an increase in insurance costs and HOA fees.

For professionals seeking quick and flexible financing solutions, hard money lenders are an invaluable source of opportunity in the real estate industry. While these lenders offer a lifeline for those looking to seize lucrative opportunities, navigating the terrain requires caution. In this article, we’ll shed light on common mistakes professionals make when borrowing from hard money lenders and provide valuable insights to steer clear of these pitfalls.

Mistake 1: Underestimating the True Cost

One prevalent mistake is underestimating the true cost of borrowing. Hard money loans often come with higher interest rates and fees compared to traditional financing options. Professionals must meticulously analyze the total cost of the loan, including interest rates, origination fees, and any other associated charges. By doing so, borrowers can make informed decisions about whether the investment remains profitable in the long run.

Tip: Always request a clear breakdown of all costs associated with the loan and carefully assess how they align with your overall financial strategy.

Mistake 2: Ignoring the Terms and Conditions

Another common pitfall is neglecting the fine print in the loan agreement. Hard money lenders may impose strict terms and conditions, such as short repayment periods and high penalties for default. Professionals must thoroughly review the terms, seeking clarification on any ambiguities. Ignoring these details can lead to financial stress and potential legal complications.

Mistake 3: Overleveraging Without a Cushion

One critical oversight is overleveraging without a financial cushion. Some borrowers make the mistake of borrowing the maximum amount without considering unexpected expenses or market fluctuations. This can lead to financial strain and increase the risk of default.

Tip: Build a financial cushion into your borrowing strategy, considering potential unforeseen expenses, market uncertainties, and other risk factors.

Mistake 4: Failing to Have an Exit Strategy

A crucial oversight is neglecting to establish a clear exit strategy. Hard money loans are typically short-term, and professionals need a well-thought-out plan for repayment. Without a viable exit strategy, borrowers may find themselves scrambling to secure alternative financing or facing unfavorable terms for an extension.

Tip: Develop a comprehensive exit strategy before obtaining the loan, considering potential challenges and outlining specific milestones for repayment.

Conclusion

Borrowing from hard money lenders can be a strategic move for professionals in real estate and investment. However, avoiding common mistakes is essential to ensure a positive and profitable experience. By thoroughly understanding the costs, scrutinizing the terms, being cautious about overleveraging, and having a well-defined exit strategy, professionals can navigate the terrain of hard money lending with confidence and success.

Amid declining property values in a tight lending environment, all-cash buyers will benefit from bargain pricing, CBRE predicts in its latest outlook.

CBRE expects an economic slowdown in the U.S. next year that will impact commercial real estate with bank lending remaining tight throughout 2024, investment volume decreasing 5 percent, cap rates expanding and property values declining.

But the U.S. may be able to avoid a recession and interest rates should be reduced later in the year as activity picks up in the second half of 2024, according to the firm’s 2024 U.S. real estate outlook.

Property types with relatively strong fundamentals, including demand, vacancy and rent growth, like industrial, retail, multifamily and data centers will be most favored by investors in 2024, according to CBRE.

Richard Barkham, CBRE global chief economist & global head of research, said in prepared remarks there is still some more pain ahead for the commercial real estate industry in 2024, including overall investment volumes remaining down for the year. But he expects an upturn by the second half and overall leasing activity to pick up as well. He notes stabilization and the early stages of recovery are also not far off.

North America dry powder by strategy. Chart courtesy of CBRE

With inflation easing, the Federal Reserve is expected to begin reducing short-term interest rates in 2024, possibly to around 4.25 percent by the end of the year and to 3.5 percent in 2025.

There should be buying opportunities in the first half of 2024, especially for all-cash buyers like sovereign wealth funds, pension funds and endowments. CBRE expects the lowest pricing for assets will occur in the first two quarters.

The report notes increasing cap rates, which have risen by about 150 basis points between early 2022 and late 2023 depending on the market and asset type, imply a 20 percent decline in values for most property types. For office, the increase was higher, rising by at least 200 basis points.

“We think cap rates will expand by another 25 to 50 basis points in 2024, with a corresponding 5 percent to 15 percent decrease in values,” the report states.

CBRE expects real estate values for most property types will likely not stabilize before mid-2024.

Historical & forecast cap rates. Chart courtesy of CBRE

Office vacancies to peak

The outlook expects another tough year ahead for the office market with office vacancy peaking at nearly 20 percent in 2024, up from 18.4 in the third quarter of 2023 and 12.1 percent at the end of 2019.

CBRE notes a slowing economy in the first part of 2024 and increasing acceptance of hybrid working arrangements will continue to limit office demand next year. The 2023 U.S. Office Occupier Sentiment Survey found more than half of the respondents planned to further reduce their office space in 2024.

Companies looking to lease less than 20,000 square feet will account for most of the leasing activity, according to CBRE. Leasing activity should rise by 5 percent in 2024, however that is still 20 to 25 percent lower than pre-pandemic levels.

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READ ALSO: How Incentives Boost Office Conversions

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Meanwhile, the flight-to-quality trend should continue with occupiers seeking space in newer, prime office properties with the best amenities. But office construction levels will be at their lowest levels since 2024, which could result in a shortage of that sought-after Class A space later in the year. CBRE forecasts that average prime office asking rent will increase by as much as 3 percent.

On the investment side, the higher-for-longer outlook for interest rates will cause some owners of Class B and C office assets to sell due to further erosion in values. Many of those older buildings that lack modern amenities will continue to struggle to attract tenants, so a higher percentage of older office assets are likely to be converted to other uses. While office conversions can be challenging, the report notes the federal government is providing grants, low-interest loans and tax incentives and local governments are also offering incentives.

Not all office markets are suffering, and the outlook shines a light on several active cities in the U.S. In Nashville, Tenn., where absorption and rents are up, demand for new office space is expected to remain strong. Miami is seeing one of the highest rent increases in the country and the vacancy rate is dropping as new-to-the market tenants are keeping the market healthy. Las Vegas has seen an uptick in leasing activity and strong preleasing at speculative projects, putting the market in a strong position heading into 2024.

Industrial sector slowdown

The industrial sector should see net absorption similar to 2023 levels and rent growth moderating to 8 percent. Construction deliveries are tapering off and expected to continue to slow down due to economic uncertainty, tight lending conditions and oversupply in some markets.

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READ ALSO: Property Management Success: How AI Boosts Industrial

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Vacancy is expected to hit 5 percent by mid-2024, up from 4.2 percent in the third quarter of 2023 but decrease later in the year due to the decline in new construction. Looking ahead, CBRE is forecasting a 7.5 percent increase in U.S. industrial production over the next five years as more occupiers improve their supply chains by adding more import locations and onshoring or nearshoring of manufacturing operations. Markets to watch include Austin and San Antonio in Texas; Nashville; Salt Lake City and Central Florida.

Retail’s declining availability

The retail sector is also facing a lack of new construction. That will contribute to retail availability rates dropping by 20 basis points next year to 4.6 percent. Asking rent growth is expected to drop below 2 percent for most of 2024 but go above 2 percent by the fourth quarter.

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READ ALSO: Mixed Shopping Cart for Retail

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Open-air suburban retail centers will see demand grow faster than other retail formats and neighborhood, community and strip centers will have stable occupancy throughout the year. Look for traditional mall-based retailers to seek other new formats outside the malls for expansion. Texas markets are expected to see more luxury brands. Other markets to watch include Orlando, Fla.; Charlotte, N.C.; Denver; San Francisco and Orange County, Calif.

AI to fuel increased data center demand

The data center market is seeing growth, often driven by advances in cloud-based solutions, artificial intelligence and other new applications and technologies. CBRE notes demand will continue to be higher than supply and construction in major markets will exceed 3,000 MW in 2024, up from the company’s 2023 estimate of 2.500 MW. Markets to watch include Austin; San Antonio and Omaha, Neb.

https://www.commercialsearch.com/news/what-to-expect-for-cre-in-2024/

In a competitive real estate market, you need more than just luck on your side. Whether you’re looking to sell your property or finally get your hands on your dream home, one thing’s for sure – you need the expertise of a seasoned real estate agent who has neighborhood knowledge, market insights, negotiation finesse and experience with contracts and closing details. Working with a real estate agent is your go-to resource when it’s time to buy or sell.

Sharing Local Expertise

When it comes to exploring community lifestyles or marketing a property to the most likely buyer at the right time, real estate agents are the ultimate insiders. They know the market and the area, and also have a network of connections and trusted professionals they can call on to ensure all your real estate goals are met. They’re well-connected in the real estate world, which means they’ve got the scoop on off-market listings and soon-to-be-available properties.

Data-Driven Decision Making

Who doesn’t love a good data-driven strategy? Real estate agents have a treasure trove of tools and technology. Using market data analytics, insights into trends impacting buyers and sellers and a comprehensive Competitive Market Analysis, they can accurately tell you where the opportunities lie and what to expect for pricing, days on the market and more.

Detailed Coordination

Ever felt overwhelmed by the intricacies of buying or selling a property? Working with a real estate agent gives you a personalized approach every step of the way. They will handle placing an offer, coordinating inspections, getting a home ready to list and developing a custom marketing plan. They’ll also connect you with any necessary vendors, including repair specialists or mortgage, title and insurance professionals. With an agent at your side, the intricate processes and complexities become a breeze.

Expert Negotiations

When you’re in the final stages of the game, your real estate agent turns into your personal advocate. They’re armed with data analytics and negotiation strategies that can lead to winning deals and peaceful resolutions. They’ll make sure it’s a smooth process.

Before getting into my predictions, the chart above is indicative of the mixed signals in the economy. Prices are rising on cardboard due to increased consumer demand. How is demand for cardboard rising if consumer spending is slowing along with inflation?  The answer to this question is key to predicting what happens in 2024.

On the real estate front, the beginning of the year started out good but as interest rates rose substantially volumes dropped off a cliff and prices began falling.  What do the changes mean for residential and commercial real estate in 2024?  Will prices have a larger reset than we are already seeing?

2024 will finally be a big reset in real estate

Regardless of prices, real estate is already in a deep recession, with closing volumes down close to 20 year lows.  At the same time interest rates are remaining above 7.5% (as of this writing).  Late 2023, we started to see the beginning of what is to come in 2024 with values finally starting to come off their epic run in most cities throughout the country.

Three factors that will shape real estate in 2024

Before getting into my predictions for next year, there are three crucial factors to discuss that will shape the real estate market in 2024 and beyond: Interest rates, inflation, and consumer sentiment. All three are intertwined as they influence each other, but it is important to discuss each one individually to understand how each unique variable will influence real estate in 2022 and beyond.

Inflation:

Inflation continues to run at almost 2 times the Federal reserve target of 2%.  There should be some break in the continued price acceleration as supply chains “catch up” with demand.  Furthermore, we are seeing in the latest retail numbers that prices are starting to dampen demand a little, which will help.  Unfortunately, there are a few categories that will remain elevated for a while: housing and wages that will factor into the price of goods.

Housing:  As rates have almost tripled from their lows, housing has gotten considerably more expensive due to financing costs.  Furthermore supply continues to be reduced due to the lock in effect.  Remember housing makes up over 30% of the CPI calculation.

Wages also look to continue higher as the work force remains constrained either from retirements or others not reentering the work force for several reasons.  For example, as inflation and wages increase, so does childcare costs which makes it more difficult for many to justify working if they are spending close to what they are making on childcare.  I do not see this issue getting resolved until possibly late 23 which will lead to continued upward pressure on wages, but likely not as much as in 2022 as demand wanes a little.

Interest rates:

The Federal reserve finally came around that inflation is not transitory and as a result they accelerated the wind down of their bond purchases which will put them in a position to pause hiking rates into 2023.   The market has picked up the inflation fight for the fed with long term yields finally heading higher even without additional federal reserve hiking.

Some are predicting a quick reversal in the fed next year.  I do not see this happening as they are forced to hold rates higher for longer due to the stickiness of inflation and huge deficit spending that further increases pressure on yields. The early indicators of rising cardboard prices is a warning that the road ahead will be bumpy on inflation.   These factors will keep mortgage rates in the 6-7% range in 2024.

Consumer Sentiment

Even with huge inflation and predictions of a downturn, the consumer keeps spending.  I think late 23 the consumer starts to get “tired out” and will eventually slow spending down as they work through built up pandemic savings.  This should help slow inflation, but will not lead to a quick reversal.

The recent bank collapses are a wildcard.  So far, the contagion seems to be isolated, but if this spreads consumer confidence will take a large hit.

Multiple macro wildcards to watch in 2024

2024 is a hard year to predict as rates remain high there is increasing probability of something breaking in the economy.  Here are some factors I am watching:

1. Deficit spending/financing: The federal deficit has basically doubled over the last 3 years and all of this must be financed through the treasury market.  As the treasury continues its borrowing rates could continue to spike.  I see no end in site to the current deficit spending which will lead to rates higher for longer
2. Interest rates/inflation: I’m not convinced that we are totally done with inflation, the labor market is still exceptionally strong which will continue upward pressure on wages and in turn products/services.  Rates will have to remain high even in the face of a possible moderate recession
3. What breaks? The federal reserve continues touting a soft landing, in order to accomplish this rates will need to remain higher for longer.  This drastically raises the risk of something breaking.  My first thoughts are commercial real estate and regional banks.  But I don’t think the economy will come out of the high rate environment unscathed.

How the three factors above play out could have substantial implications on real estate, for example if something in the economy breaks bad enough like commercial real estate, we could enter a recession with higher unemployment than anticipated.  My gut says that rates will stay higher for longer due to the tight labor market and increased deficit spending which ultimately will put pressure on commercial and residential real estate prices.

What are my predictions for real estate in 2024?

2024 still looks to be a transition year, but likely will not happen exactly as economists have planned.  Unfortunately, there are more negative than positive risks for real estate heading into the second half of 2024.

In the first half of the year, I do not see the bottom dropping out of prices.  There will be some softening with prices dropping in the 5-10% range, some markets will hold steady while others could still increase further. The real test comes in the second half of the year when consumers exhaust their pandemic savings and the bills come due for all the spending.  

Furthermore interest rates will remain much higher than the market is currently anticipating, which will ultimately lead to a reset in the economy.  

On the commercial side, rising real interest rates will continue to put pressure on cap rates.  Remember that the higher the cap rate the lower the value (they work in inverse to each other.  Office is going to get destroyed with values dropping around 30% overall due to lower demand, higher financing rates, and much higher cap rates.  Retail and Industrial will also come off their highs as cap rates continue to rise to keep up with the rise in treasuries.  Rents will not be able to rise fast enough to compensate for the higher cap rates.

The wild card is what happens late 2024 as higher interest rates continue to dampen demand; furthermore, the federal reserve must hold rates higher for longer which will keep rates from falling back to their lows.  Worst case scenario 10-15% price drops, likely is somewhere under 15% reset in prices.  This will not occur until mid 2024 as the consumer finally comes to terms with increased borrowing costs and slows down their spending. 

Commercial is a different ballgame as  commercial properties are at much higher risk for larger price drops.  For example, large class B office will need a huge reset in prices which could be in the 40%+ range.

Will there be a recession in 2024?

I’m going to put my odds at 75% for a recession in 2024.  As rates remain higher commercial real estate values will plunge which will lead to more bank failures and less lending.  Eventually the lack of liquidity will flow through to consumer spending leading to a slowdown.  Unfortunately, the risks of recession are mounting as there is always a lag in the economy.  Furthermore, I think the market is calling the all clear on inflation a bit too soon and will be in for a rude surprise of higher rates.

Summary:

2024 is going to be a bumpy year in real estate.  We are already seeing signs of this on the residential side with the median prices off 5% in Denver year over year and volumes down 25%. This is just the beginning of the reset in real estate.

Commercial real estate is a whole different animal with rents dropping, vacancy rising, and ultimately prices facing a huge reset especially in the office sector along with multifamily.  If rates remain higher for longer, there will be increasing stress on every commercial property type as cap rates remain elevated.

Anyone in residential or commercial real estate is going to have a tough ride as volumes will stay extremely low throughout the nation until there is a major reset in the economy that forces individuals and businesses to sell and rates to fall substantially.  Long and short 2024 looks like a tough year in real estate that will likely worsen for most compared to 2023.  Fortunately every single cycle creates new opportunities and we can always look forward to 2025

Additional Reading/Resources

• https://www.bloomberg.com/news/articles/2023-11-02/housing-crisis-gets-worse-for-americans-on-mortgage-lock-in-effect?srnd=premium
• https://car-co.stats.showingtime.com/docs/mmi/x/Statewide?src=map
• https://www.wsj.com/business/the-rising-price-of-cardboard-a-positive-sign-for-the-economy-08908d0f

Fed raises rates 2200% The floor on housing prices drops

The real estate party cannot go on forever.  We are in a goldilocks scenario where prices are staying high even in the face of doubling mortgage rates.  Unfortunately, eventually the porridge cools off!    It is not possible with the steep rise in interest rates that there is not a misstep in the economy.    Will the billions in Wall Street money sitting on the sideline waiting for a reset keep housing prices high?  Why is the “floor” on real estate prices dropping?

This real estate cycle is radically different than 2008

This real estate cycle has some stark differences with 2008 and other prior cycles.  Typically the federal reserve raises rates quickly to contain runaway growth and inflation.  In this cycle, the federal reserve waited about a year too late before tapping the brakes which has allowed inflation and consumer spending to become entrenched.

Even as the federal has raised rates from .25% to 5.5% consumers keep buying cars, trips, etc…. keeping inflation well above the federal reserve target.  This strong consumer spending and high inflation changes this real estate cycle.

If we rewind to 2008 along with prior cycles, there was typically some event that led to a reset in prices.  In 2008, the raising of interest rates and large quantities of adjustable rate mortgages led to an enormous drop in real estate prices and a subsequent decline in employment.  The Federal reserve was then able to drop interest rates to help the economy recover.

In this cycle, with inflation running well above targets, dropping rates quickly is not in the cards as the goal is a “soft landing” where employment stays high and consumer spending does not pull back enormously.  Under this scenario interest rates stay much higher for considerably longer as the federal reserve will be hesitant to drop rates to early as inflation could reaccelerate.

Wall Street money puts a floor under real estate

I’ve said for a while that wall street buyers in this real estate cycle would put a “floor” under real estate prices as they deploy billions in capital.  Essentially the theory is that as real estate prices fall, big investment firms like Blackstone and countless others will “feast” on lowered real estate prices as they can buy huge quantities of single family homes for long term rentals.  As they deploy capital this will put a “floor” under real estate prices as their demand will halt too far of a drop in prices.

Federal reserve has changed where the floor is

As mentioned above, in this cycle we will not see a huge drop in interest rates quickly.  As interest rates remain high, the return on Capital that is required also remains high.  For example, if the federal funds rate stays at 5%, basically the risk free rate of investing, then investors will demand a higher rate of return for taking risks.  In this case an investor will require a higher return.  For example they would require a 6 % return or they could invest in other assets like the mortgage market with interest rates on 30 year loans north of 8% (as of this writing).

This rate of return is also known as the capitalization rate (cap rate) in commercial properties.  As wall street firms buy properties they are analyzing them based on their rate of return.

Remember the higher the cap rate the lower the price of the property is (inverse). We are seeing this play out in real life. Invitation, which owns about 83,000 houses, has been selling properties that have appreciated to the point that they are yielding less than 4% and putting the proceeds in the bank, where the cash is earning more than 5%.  (Wall Street Journal)

Prices have to fall substantially more in order to hit the floor

With rising interest rates this means cap rates have increased substantially.  As cap rates remain high the only solution to hit the rate of return is for prices to fall.  Below is an example of of how prices will for a single family home will be impacted by rising cap rates.

As you can see it will take a big price adjustment to get wall street money to move off the sidelines with interest rates remaining high.

Will prices really fall as much as the model above predicts?

I find it highly unlikely that we will see retail prices of homes fall 46% as this would put us on par with 2008 which is not in the cards at this point.  But, there will still be a drop in the 5-15% range is most probable.  At the same time large investors will focus on buying huge pools from banks, the FDIC, etc… as the financial sector hits headwinds.

Summary

Before this recession, I thought that Wall street would put a floor under prices so that they didn’t fall too far.  Unfortunately in a high rate environment this assumption has been turned on its head.  Based on interest rates staying higher for longer this means that Wall Street will not bail out the housing market until prices fall considerably (40% or so to make the returns work).  Although I don’t foresee a drop this steep, it does portend that the market will be able to fall quite a way before Wall street comes to the rescue.

Currently my base case is a 5-15% drop depending on market, price point, etc… but I don’t see a 2008 repeat in the near future.  The wild card is how high the federal reserve needs to take rates and how long they have to hold them high before something bad breaks in the economy.  So far, it looks like a moderate recession, but as with anything in economics, there are a ton of variables that could radically alter this assumption.  In the meantime, I’m confident prices will have a reset in early 2024 due to higher rates so plan accordingly.

Ever stumbled upon a quaint café in an unexpected place and thought, “How did I not know about this?” The world of real estate has its own hidden cafes—secondary and tertiary markets. But why are they like hidden gems, and how can you, as an investor, benefit from them? Let’s unpack it:

• Primary Markets: These are big players such as Dallas, LA, or Chicago.
• Secondary Markets: Cities like Austin, Nashville, and Portland, which have been gaining traction.
• Tertiary Markets: Think of areas like Bend, Oregon, or Macon, Georgia. They may be talked about less, but they’re brimming with potential.

Considering a fix-and-flip project or rental investment properties in these lesser-sung regions? Let’s weigh some of the pros and cons.

Upsides of investing in secondary and tertiary markets

Cost-efficient entry

These markets are often in regions that haven’t experienced the rapid urbanization and commercialization in primary cities. Without the hype and media attention driving up property prices, entry costs remain relatively low. This allows investors to make strategic, calculated investments without the heavy financial weight that prime markets often demand. A savvy investor can view this as an opportunity to diversify their portfolio, leveraging the affordability of these markets.

Less crowd, more space

Most often in the limelight, primary markets attract domestic and international investors. In contrast, secondary and tertiary markets remain relatively under the radar.

The charm of this understated focus is the freedom it offers. Real estate investors can take their time to understand a property, negotiate without the pressure of multiple counter-offers, and finalize deals in a less aggressive environment. This space for deliberation can lead to more informed and, ultimately, profitable decisions.

Promising returns

The untapped nature of these markets means there’s substantial room for growth. The ROI here isn’t just about immediate profits. It’s also about long-term appreciation.

As these markets mature and attract more attention, early investors can see substantial returns on their initial investments. To succeed in these markets, look for properties that can increase in value over time as the market changes.

Steady growth

Primary markets are influenced by global trends and international investments. On the other hand, secondary and tertiary markets typically experience growth as a result of local factors.

This means growth is often steadier and more predictable, grounded in local economic and infrastructural developments. For an investor, this translates to more sustainable, organic appreciation. Monitoring local news, understanding community plans, and keeping an ear to the ground can provide valuable insights into potential growth trajectories.

Challenges of investing in secondary and tertiary markets

Potentially more demanding research

The relatively low-profile nature of these markets means that traditional real estate research tools might not always offer comprehensive data. This challenge, however, is also an invitation for investors to innovate. Engaging with local realtors, joining community forums, and even connecting with residents can offer invaluable insights. Immersive research helps choose properties and understand local culture, preferences, and long-term investment viability.

More gradual appreciation

These markets are influenced by local factors. So, the speed of growth may not be as fast as the rapid increases seen in top markets.

However, slow and steady growth can be a blessing in disguise. It gives investors the time to adapt, make further investments, or even exit if they foresee a plateau. Recognizing the steady nature of these markets is essential to setting realistic expectations and crafting a strategic investment plan.

Networking nuances

The bustling real estate events and seminars are less frequent here, but that shouldn’t deter the passionate investor. Embrace this as an opportunity to pioneer. Host local meetups, collaborate with community leaders, or even establish digital forums for like-minded investors targeting these markets. By taking the initiative, you not only build a network but potentially position yourself as a thought leader in the space.

Market variability

These markets can be sensitive to local economic shifts. A significant employer downsizing or a local industry experiencing a downturn can have palpable effects.

But with challenge comes opportunity. Staying informed about local happenings can allow proactive investors to pivot strategies, hedge risks, and even identify new avenues for investment. Regular engagement with local businesses and economic forums can be invaluable.

Taking the plunge: Market research and tips for new local market investments

It’s pivotal to acknowledge the importance of thorough market research when considering investments in secondary and tertiary markets. Venturing into these lesser-known territories requires a tailored approach. So, where should you start?

• Local Expertise: Building relationships with local real estate agents or brokers can offer unique insights that standard market reports might miss. They have their fingers on the pulse of the local community, understanding the intricacies and trends that define these markets.
• Community Forums & Social Media: Engage in local online forums or social media groups. These platforms have valuable information about neighborhood developments, upcoming projects, and local events that can affect property values.
• Visit In-Person: Nothing beats an on-ground visit. Walk the neighborhoods, visit local businesses, and strike up conversations with residents. This will show you the community spirit and help you understand how many people want to rent or buy renovated properties.
• Assess Local Amenities: Look for signs of growth. Are new schools being built? Are there parks and recreational areas? What about public transport facilities? These can be indicators of a budding community, which can be especially attractive for rental investments.
• Stay Updated: Once you’ve gathered your initial insights, it’s essential to keep updating your knowledge. Markets evolve, and what’s true today might change in a few months. Set up Google alerts, subscribe to local news outlets, and keep in touch with your local connections.

Venturing into a new market also means adapting your investment strategies to align with local demands. For fix-and-flip projects, understanding the local architectural preferences, popular home features, or even favored color palettes can be the difference between a property that sells instantly and one that lingers on the market.

For rentals, it’s about understanding the demographics. Are potential tenants young professionals, families, or perhaps retirees? Each group has unique needs, from proximity to schools to easy access to nightlife.

Aside from conducting market research, it is crucial to find a reliable lending partner. One that has a proven track record and expertise in the local market.

That’s where Muevo comes in

At Muevo, we’re changing the real estate financing game. Our presence in 50 states plus DC has equipped us with diverse market insights. We’ve seen the aspirations of investors in primary cities and the untapped passion of those in secondary and tertiary ones. This broad spectrum of experience allows us to offer tailored financing solutions, from Fix and Flip/Bridge Loans to DSCR Rental and Rental Portfolio Loans.

We combine the agility of technology with human expertise, ensuring you close deals faster, enjoy competitive rates and have our unwavering support in every step.

Wrapping up

Exploring secondary and tertiary markets means embracing both the challenges and opportunities they present. The key? Knowledge, diligence, and a reliable partner in your corner. As the landscape of real estate investing evolves, staying informed and adaptable can be your greatest asset.

So, whether you’re diving into the deep end or just dipping your toes, remember every market has its unique story. Happy investing, and here’s to uncovering the next great opportunity!

Dreaming of homeownership? A mortgage loan can help you turn that dream into a reality. In this edition, we’re excited to explore the world of mortgage loans and how they can empower you to purchase your dream home. Let’s dive in!

Understanding Mortgage Basics:

Begin by familiarizing yourself with the different types of mortgage loans available. Research fixed-rate mortgages, where the interest rate remains constant throughout the loan term, providing stability in your monthly payments. Alternatively, explore adjustable-rate mortgages, which offer a lower initial interest rate that may adjust periodically based on market conditions. Understanding these options will help you make an informed decision when selecting a mortgage.

Building a Strong Credit Score:

A good credit score is essential when applying for a mortgage loan. Take steps to improve your credit score to access more favorable loan options. Pay your bills on time, reduce your overall debt, and keep your credit utilization ratio low. Regularly check your credit report for errors and address any discrepancies promptly. A strong credit score can lead to better interest rates and terms, potentially saving you thousands of dollars over the life of your loan.

Exploring First-Time Homebuyer Programs:

If you’re a first-time homebuyer, explore special programs and incentives designed to assist you in the homeownership journey. Many regions offer down payment assistance programs, reduced interest rates, or educational resources to help you navigate the process. Research what options are available in your area and determine if you qualify for any of these programs. They can significantly ease the financial burden of buying your first home.

Saving for a Down Payment:

Start saving for a down payment as early as possible. A larger down payment can result in a lower loan amount, lower monthly payments, and potentially better interest rates. Review your budget and identify areas where you can cut back to allocate more funds toward your down payment. Consider automating your savings by setting up a separate account dedicated to your homeownership goal. Additionally, explore alternative down payment options, such as government assistance programs or grants.

Getting Pre-Approved:

Before house hunting, consider getting pre-approved for a mortgage loan. This process involves submitting your financial documents to a lender who will assess your financial situation and provide an estimate of the loan amount you qualify for. Pre-approval demonstrates your seriousness as a buyer and can give you a competitive edge when making an offer on a home.

Remember, buying a home is a significant financial decision, and taking the time to educate yourself about mortgage loans is crucial. By understanding mortgage basics, building a strong credit score, exploring first-time homebuyer programs, saving for a down payment, and getting pre-approved, you’ll be well-equipped to embark on your homeownership journey. Stay tuned for more insights and guidance on homeownership in our upcoming newsletters.

Wishing you success on your homeownership journey!

Spring’s Housing Market Is About To Reach a Peak With ‘Outsized Impact’ Buyers Really Need Right Now

As strange as the housing market has gotten lately, certain seasonal rhythms still prevail. And despite being somewhat dampened by stubbornly high home prices, roller-coaster mortgage rates, and an unpredictable economy, the spring homebuying season is about to reach an apex that’s well worth taking advantage of.

“We’re moving into the period of the year when the number of newly listed homes tends to peak—usually in May or June,” notes Danielle Hale, chief economist for Realtor.com®, in her weekly analysis.

Granted, this seasonal pinnacle might not seem all that noticeable, since the number of new sellers listings their homes is still lower than it was at this time last year. For the week ending May 6, 16% fewer new homeowners listed their homes for sale. Still, this annual decline has been steadily shrinking week by week.

Even though there is still a gap, it’s smaller than what was typical in most of March and April,” explains Hale.

And although new listings are down from last year, total inventory (of both new and old listings) is up 31% for the week ending May 6. In other words, there are plenty of homes for sale, although buyers might need to give stale listings a second look. This portends a potential boost to the overall housing market and offers hope to both buyers and sellers.

In short, the housing inventory is “evolving,” according to Hale. “While further moderation is needed, this is a welcome improvement that comes as new listings near their seasonal high point. Improvement now could have an outsized impact.”

We’ll break down what this all means for both homebuyers and sellers in our latest installment of “How’s the Housing Market This Week?”

The latest mortgage rates and home prices

What’s not so rosy? High mortgage rates are generally holding steady. The interest rate on a 30-year fixed-rate mortgage averaged 6.35% in the week ending May 11, according to Freddie Mac. That’s a bit lower than last week’s 6.39%, but still high enough to make many buyers uncomfortable.

Further compounding buyers’ problems is that housing prices are still inching upward.

The national median list price came in at $430,000 in April, up from $424,000 in March. But for the week ending May 6, home prices grew at a rate of just 2.4% compared with last year. That’s its slowest growth rate since May 2020, when the COVID-19 pandemic was raging across the country.

While tapering home prices is a glimmer of positivity for homebuyers, it’s not enough to really temper their bottom lines quite yet.

“For potential first-time homebuyers, this means that affordability will continue to be a top concern,” explains Hale. “For potential sellers, this means equity is still relatively high.”

What the spring market’s peak means for home sellers

While sellers are understandably thrilled by higher home values, they might have to drop prices soon, since many homes have been sluggishly stuck on the market with no takers.

Home sales have slowed for the past 40 weeks, with homes spending an average of 16 days longer on the market for the week ending May 6 compared with the same week one year ago.

And home sellers might struggle as more properties hit the market in the coming weeks.

“As market competitiveness wanes, sellers may become more flexible,” says Hale. However, the “degree of slowing observed depends on your local market. For example, homes are spending a little over a week longer on the market compared to a year ago in the Midwest and Northeast, where we know housing markets have fared better as affordability keeps demand high.”

Yet in the South and West, homes spent two more weeks on the market for the week ending May 6 compared with a year ago.

The key takeaway here is that while it’s important to understand national context, what really matters are the trends in your local market,” says Hale.

Spring’s Housing Market Is About To Reach a Peak With ‘Outsized Impact’ Buyers Really Need Right Now

Real estate investing has become increasingly popular in recent years. One of the reasons for this is the ability to generate passive income. Passive income streams are a great way to create long-term wealth with minimum effort and involvement.

As someone who has invested in real estate for passive income, I can attest to the benefits of this investment strategy. I remember purchasing my first rental property and feeling both excited and nervous about the prospect of being a landlord. However, as time went on, I found that the passive income generated from my rental property allowed me to achieve financial stability and freedom. I was able to use the rental income to pay off the mortgage on the property and generate a steady stream of passive income each month. It was a great feeling to see my investment grow over time and know that I was securing my financial future.

In this article, we’ll explore how you can build passive income streams as a real estate investor.

Understanding Passive Income

Before we dive into the different ways you can generate passive income as a real estate investor, it’s important to understand what passive income is. Passive income is money that you earn without actively working for it. In other words, it’s income that you earn passively with minimal effort and involvement.

Strategies To Generate Passive Income

1. Rental Properties

Rental properties can provide a steady stream of passive income through rent payments from tenants. To generate passive income from rental properties, investors should aim to purchase properties with positive cash flow, meaning the rent income exceeds the expenses associated with the property. Additionally, investors can hire a property manager to handle day-to-day operations, freeing up their time and allowing for truly passive income.

2. Real Estate Investment Trusts (REITs)

REITs are a passive investment option that allows investors to purchase shares in a company that owns and manages a portfolio of income-producing real estate properties. The income generated from these properties is then distributed to shareholders in the form of dividends. To earn passive income through REITs, investors can purchase shares through a broker or online investment platform.

3. Crowdfunding

Crowdfunding platforms allow investors to pool their money with others to invest in real estate projects, typically with lower investment minimums than traditional real estate investments. Investors can earn passive income through crowdfunding by receiving a portion of the income generated by the property, such as rental income or profits from a property sale.

4. House Hacking

House hacking involves living in a property and renting out a portion of it to generate passive income. This strategy can be particularly effective for those looking to purchase their own home, as the rental income can offset the cost of the mortgage. To earn passive income through house hacking, investors should ensure the rental income exceeds the expenses associated with the property.

5. Short-Term Rentals

Short-term rentals such as Airbnb can be a lucrative way to generate passive income, particularly for those with properties in desirable locations. To earn passive income through short-term rentals, investors should ensure their rental rates are competitive, provide excellent customer service, and maintain a well-appointed and well-maintained property.

6. Flipping Houses

Flipping houses involves buying a property, fixing it up, and selling it for a profit. While flipping houses requires more work than some other strategies, it can still generate passive income if investors hire a team to handle the renovations and sale. To earn passive income through flipping houses, investors should aim to purchase properties with high potential resale value and minimize their time spent on the renovation and sale process.

7. Commercial Real Estate

Commercial real estate investments can provide passive income through leasing the property to tenants. To earn passive income through commercial real estate, investors should aim to purchase properties with desirable locations and solid tenant bases and hire a property management company to handle day-to-day operations.

8. Private Lending

Private lending involves lending money to other real estate investors for their projects. To earn passive income through private lending, investors should ensure the borrower has a solid track record, and the loan is secured by the property, and agree on a competitive interest rate and repayment terms.

9. Real Estate Notes

Real estate notes involve purchasing the debt on a property and earning passive income through interest payments. To earn passive income through real estate notes, investors should ensure the borrower has a solid track record, the property has a desirable location, and agree on a competitive interest rate and repayment terms.

How to Choose the Right Passive Income Stream

Now that you have an understanding of the different ways you can generate passive income as a real estate investor, it’s important to choose the right passive income stream for you. Here are a few factors to consider:

1. Time Commitment

When choosing a passive income stream in real estate, it’s essential to consider the amount of time you’re willing to commit to it. Rental properties and flipping houses require a significant amount of time commitment, as they involve managing tenants, maintenance, and renovations. On the other hand, REITs and real estate notes require very little time commitment, as they involve investing in a company or debt instrument. Consider your lifestyle and how much time you have available to devote to your passive income stream.

2. Upfront Investment 

Another factor to consider when choosing a passive income stream in real estate is the upfront investment required. Rental properties and flipping houses require a significant upfront investment in the form of a down payment and renovations. On the other hand, REITs and crowdfunding require a much smaller upfront investment. Consider your financial situation and how much money you’re willing to invest upfront.

3. Risk Tolerance 

It’s important to consider your risk tolerance when choosing a passive income stream in real estate. Rental properties and flipping houses come with a higher level of risk as they are directly tied to the real estate market and require a significant amount of investment. REITs and real estate notes, on the other hand, come with a lower level of risk as they offer a more diversified portfolio. Consider your risk tolerance and willingness to take on more significant risks for potentially higher returns.

4. Personal Goals

Finally, consider your personal goals when choosing a passive income stream in real estate. Do you want to generate a lot of passive income quickly, or are you willing to take a slower approach? Do you want to be hands-on with your passive income stream, or would you prefer a more hands-off approach? Consider your goals and how your chosen passive income stream can help you achieve them. For example, if you’re looking to generate a lot of passive income (relatively) quickly, flipping houses may be a better option than REITs, which offer more stable returns over time.

Summary

Building passive income streams as a real estate investor can be a great way to create long-term wealth. Whether you choose to invest in rental properties, REITs, crowdfunding, house hacking, short-term rentals, flipping houses, commercial real estate, private lending, or real estate notes, there are many ways to generate passive income as a real estate investor. Consider your personal goals, risk tolerance, and time commitment when choosing a passive income stream, and remember to educate yourself, diversify your portfolio, build a strong team, and be patient.

As I experienced, and while risky, building up passive income streams can be exceptionally rewarding in the long run allowing you to enhance your lifestyle and provide you with financial freedom and flexibility. 

If you find yourself ready to invest in your passive income dreams, you’ll likely need some funding to turn those dreams into a reality. Well, the good news is you are already in the right place! Our team at REI News specializes in finding the most trusted and affordable lenders for real estate investors. Discover your financing optionsby speaking to us today!