How to Invest in Real Estate in 2023

Real estate investing is shaping up to be an exciting scene in 2023. Between the preference for remote working and the rising interest rates, this could be the perfect time to finally step into the investment property world, and these tips will help you find success.

The most important factor in your real estate journey is your financial portfolio. Investing in property is a numbers game — the more you spend on fees and services, the less profit you take home. One way to counter extra fees is to strengthen your financial health. For both a mortgage and cash-in-hand financing, there are some elements to get in order before you buy.

Financing depends on a few factors, but your credit score is one of the most important — not only for the initial approval but also for the interest rates associated with your loan. Generally, the higher your credit score, the lower your rates. Getting the lowest rates possible is key to your success in investment properties, especially at a time when interest rates are the highest they have been in a decade. Before you dive into the market, check your scores and review your credit report. Check for any errors and take any necessary action to boost lower scores. You want to keep a close eye on your credit report before obtaining a pre-approval so that you can make any needed adjustments.

Once your finances are in order and your credit is clean, find a reputable lender and get preapproved for a mortgage. Some agents and sellers require preapproval before allowing a potential buyer to tour the property, and being preapproved can save valuable time when you are ready to make an offer. If you plan to finance your new property with a mortgage, this should be one of your first steps before searching for your new investment.

Anything can happen in real estate investing, so it is imperative to have a reserve of cash ready and waiting should you need it. Whether you are renovating a fix-and-flip project or closing on your first purchase, costs and fees can add up, and the last thing you want is to feel stressed out about money. Real estate is unpredictable; even with home inspections and careful inquiry, you can still encounter unforeseen problems. From frozen pipes and outdated roofs to mold and market changes, challenges can arise unexpectedly. Having a cash reserve can help you stay calm, make smart choices, and save money down the line. A larger down payment will offset mortgage payments, meaning an increased income from rentals, while having cash to pay out-of-pocket can eliminate credit card fees and keep your credit report squeaky clean.

The benefits of working with a real estate agent have been widely recognized, and agents well-versed in property investing can be particularly helpful. Agents can advise on the most appropriate neighborhoods for house flipping or vacation investments and can be a tremendous resource for professional referrals, contractors, and repair services. For example, if the Hudson Valley real estate market is the up-and-coming hot spot for rentals, your agent will steer you in that direction. Experienced agents are also known as fierce negotiators, which is essential when investing. Their expertise with contracts and negotiations could mean a better deal and more profit for you.

Real estate investments come in all shapes and sizes. From day-by-day rentals on Airbnb to long-term investment properties and flips, the real estate market offers a wide variety of opportunities to find success. Before beginning your home search, think about the type of property you would like to invest in and any lifestyle or financing factors that may affect your decision.

Also referred to as house flipping, this is a popular choice for investors as it can yield a fast and impressive profit. A fix-and-flip investment is a property the investor buys at a discounted price, fixes up, and resells for a profit. These homes are usually in subpar condition or need renovations and repairs. The old adage for investors is to buy the worst house on the best block — in other words, a run-down house with potential located in an excellent area or neighborhood. You can’t change the location of the house, but you can change how it looks, so search carefully for the perfect fix-and-flip, and remember that location is everything.

This investment type is particularly attractive to buyers with some house repair skills and construction ability — the more work you do yourself, the more money you can make. That said, part of the appeal of fix-and-flips is the speed at which you can make a profit; in this case, time is money. If you are capable of making all the repairs yourself but are only able to put in a few hours a week, the amount of time it will take you to finish the house may negate the profit. Every month you spend working on the house, that’s another month of mortgage payments, insurance, and maintenance fees out of your pocket. Fix-and-flips are ideal for those investors who have the skills, resources, and time to complete the repairs in a month or two. If you hire a contractor, you will have to weigh the costs against the amount you can command for the finished property to see if you will still benefit financially.

Buying a rental property can be an excellent way to build your investment portfolio. Long-term rentals are a buy-and-hold game, meaning you should not expect to see the flashy returns of house flipping but rather a slow build of assets and income. Predictions for 2023 regarding rentals are promising — with interest rates on the rise, many renters have chosen to continue renting rather than buy. Suburban areas are gaining popularity as remote working has become commonplace, and rents are increasing nationwide, making this year the ideal time to enter this lucrative market.

From Air BnBs to countryside getaways, vacation rentals are an exciting category of rental properties. Depending on the location and type of housing, you can potentially charge top dollar — and the added bonus, of course, is you can use the property in the off-season, essentially earning yourself a complimentary holiday.

Are you interested in investing in real estate this year? Contact Byron Anderson today to discuss your investment interests and explore rental homes and investment properties. Byron and the entire team at HW Guernsey Realtors are happy to help you find the perfect Millbrook and Hudson Valley real estate. Serving New York for a century, HW Guernsey is a storied firm that boasts a sterling reputation for expertise, professionalism, and unparalleled market insight.