RESEARCH, ANALYSIS, AND NETWORKING

Before investing in real estate it is important that investors execute due diligence. Conduct thorough research and analysis of the local real estate market to identify areas with growth potential, favorable investment conditions, rising property values, high demand, and positive economic indicators.

Simultaneously, build a strong network within the real estate industry by attending local real estate events, joining investor groups, and connecting with professionals such as real estate agents, property managers, and fellow investors. Networking provides valuable insights, opportunities, and access to off-market deals, enhancing your overall investment strategy.

Taking Advantage Of The Downturn

For a number of reasons, the real estate market has been experiencing a noted downturn since its peak in mid-2020 to late 2021. Covid sparked a run on people selling their homes for top dollar, and the uptick in remote work led people to venture out and try new living arrangements.

In 2022 and into 2023, interest rates continued to rise sharply, leading to a slowdown in the mad rush for home purchases. The stories of homes with multiple over-asking offers within hours of hitting the market began to wane and slowly fizzled out.

Although substantial price declines have still not occurred for real estate properties, the average sale price has

Think Income Production

Real estate investors should always consider what income can be produced from their investment properties. For example, investing in income-producing farms can lead to large returns due to the low cost of land and higher potential land appreciation. There is also income potential to be found in whatever goods those farms produce.

Vacation rentals can also be another option for investors seeking peak income production. There can be a high return on investment (ROI) potential for vacation rentals, especially those located in high-demand vacation areas.

slightly declined, allowing investors to find more deals with greater ease. While economists and real estate analysts are expecting a continued “modest downturn,” this could still be a positive shift for savvy investors looking to spend less on real estate. With bidding wars becoming a thing of the past, investors who know the market and have a finger on the pulse of home sales can get in and score some prime properties without paying a premium.

Another advantage for investors can be found within commercial and mixed-use real estate. These properties did not see quite the purchasing craze that residential real estate experienced in 2020 and 2021, meaning investors for these properties have still been able to find some good investment opportunities. Because these properties did not experience the sharp overvaluation of residential real estate, investors are not going to feel the pain of an equally sharp decline in valuation once the boom finally ends.

There’s a significant potential for the vacation rentals market, especially with more people venturing out further following the pandemic. If you can determine that the average monthly rental income you will garner from the property exceeds your mortgage payment, you have likely landed on a good investment opportunity.

Tax Benefits

Investing in real estate in the United States can offer several tax benefits. However, it's important to note that tax laws are subject to change, and the specific benefits can vary based on factors such as your individual circumstances, the type of investment, and the current tax regulations.

One of the significant tax advantages is the ability to deduct mortgage interest paid on your investment property. This deduction can be claimed on loans used to acquire, build, or improve the property.Real estate investors can take advantage of depreciation deductions.

The IRS allows you to deduct a portion of the property's cost over its useful life as a non-cash expense. This deduction can help offset rental income and reduce taxable income.

If you sell your primary residence, you may be eligible for a tax exclusion on the capital gains. If you meet certain ownership and residency requirements, you can exclude up to $250,000 in capital gains ($500,000 for married couples filing jointly) from your taxable income. Real estate investments can generate passive losses, such as when rental expenses exceed rental income. These passive losses can be used to offset other passive income, reducing the overall tax liability.

Certain retirement accounts, such as self-directed IRAs or Solo 401(k)s, allow you to invest in real estate. By utilizing these accounts, you can enjoy tax advantages, such as tax-deferred or tax-free growth, depending on the type of account. Various expenses related to real estate investment can be taxdeductible. These may include property taxes, insurance premiums, property management fees, repairs, maintenance costs, and professional services like legal and accounting fees.

It's important to consult with a qualified tax professional or CPA to understand the specific tax implications of real estate investment based on your circumstances and to stay updated on any changes to the tax laws that may impact your investments.

Proceed With Caution

In a volatile market, investors should proceed with caution when entering into any real estate deal. Though experts agree that any bubble burst will not be to the level we saw in 2008, a downturn is already occurring, meaning investors need to be aware of where they are choosing to spend their money.

With properties that are listed below market price, investors should do their research to discover why they are priced in such a way. Buyers need to analyze the cost of potential rehabs and operating costs of the property, as those costs may exceed what the property is worth and lead one to operate it at a loss. Buyers should also review the time the property has been on the market — the longer a property has sat on the market, the bigger deal an investor may be able to snag.

Additionally, in a volatile market, investors can take advantage of preforeclosure properties. Tax sales and mortgage sales can bring some big deals to investors who know what to look for. Short sales, where owners owe more on a property than it is worth, are also making a return to the market, especially with commercial or rental properties. Investors can possibly negotiate bargainbasement prices with the mortgage holding bank with these properties they are looking to unload.

Because of the opportunities for longterm appreciation that still exist, despite the up and down of the current market, real estate is still a good investment in 2023. By carefully considering all of your options in the post-pandemic real estate landscape, investors can uncover some incredible deals and stellar income possibilities.

Although the current real estate market presents certain challenges, it also offers a range of possibilities. Despite market fluctuations, long-term appreciation potential remains intact, making real estate a worthwhile investment in 2023. By thoroughly evaluating all options in this post-pandemic landscape, investors can unearth substantial deals and impressive income prospects. n