As mortgage interest rates rise and the real estate market is set to cool in the second half of 2022, many are wondering if investing in real estate is still a good way to build wealth long-term. Ana Fajardo, an experienced wealth manager who runs Wealth Companies, offers insight that can help individuals make smart long-term investments.
First, Fajardo notes, it’s important for aspiring investors to realize that real estate values will almost certainly continue to rise long-term. One reason for this is that demand still exceeds supply. Estimates from the end of 2021 show that only 910,000 homes were available for sale in December, which is a record low. Supply chain shortages and labor shortages are exacerbating the problem, making it hard for construction companies to build additional homes, while inflation is pushing up the cost of new home construction.
Additionally, Ana Fajardo points out, that rising interest rates may be putting off buyers, but there is a very real chance that these rates may rise yet again in the near future as the FED attempts to rein in runaway inflation. Investors may have been better off had they gotten a loan in 2021 when rates were at record lows, but even now rates could be lower than they will be in the next few years. With careful planning and research, even investors with a limited budget can still find good deals without paying more than they are able to afford.
At the same time, Ana Fajardo is quick to point out that careful research is in order to ensure one is able to turn a profit on his or her investment. Working with a real estate agent is always a wise idea, she notes, but it’s also imperative for investors to work with a wealth management expert. A wealth management expert, unlike a realtor, will be able to assess an investor’s long-term financial goals to ensure the real estate purchase is in line with the investor’s needs and requirements. For instance, those who want a steady stream of income may want to look into purchasing real estate that can be rented out to tenants, while those who want to turn fast profits and/or avoid the hassle of maintaining homes and dealing with tenants may want to consider flipping homes. Other investors may want to consider commercial real estate investment or work with a real estate investment trust.
Real estate is a tangible commodity that will always be in demand. The fact that demand remains high while supply is at an all-time low will likely keep the market afloat even if the market cools in some locations. Interest rates are higher than they were last year but could rise further in the future. Those who want to build wealth by investing in real estate may do well to get in on the market now; however, as Ana Fajardo notes, expert advice is always in order to help an individual pick investment in line with his or her long-term wealth-building plans.