Why is now a good time to buy amid inflation

  • Abraham Anderson says now is the time to lock down some real estate.
  • As inflation rises, so does the value of your property, but the mortgage goes down, he says.
  • He advises investors to focus on states with good homeowner protection laws.

Investing in real estate is not as easy as buying stocks or even crypto. There are many other steps involved in buying a property and renting it out, on the one hand. And a slight miscalculation, especially on rehabilitation costs, can put you in the negative.

This is why many real estate investors always keep an eye on the overall market, which includes metrics like interest rates and buyer demand. Hooking up a property at the right time is also an important part of making a well-calculated purchase.

But home values ​​are skyrocketing right now. In 20 major metropolitan areas across the United States, prices rose 19.7% year-on-year in August, slightly below the record the month before, according to the latest S&P CoreLogic Case-Shiller Index. With prices rising and buyers competing, real estate investment gurus such as BiggerPockets Podcast co-host Brandon Turner say investors will lose money right now.

Many active real estate investors disagree, including Abraham Anderson. At 26, he’s already racked up more than 1,300 rental units, according to public ownership records reviewed by Insider. And he says he makes offers every day.

Most of the offers he makes fall well short of the requests, which means he rarely gets a response. But making frequent offers increases the likelihood of hitting a target that it sees as a deal, regardless of what the market as a whole is doing.

For Anderson, if you know how to manage your numbers and are confident that you have a positive cash flow after spending, it doesn’t matter when you decide to buy a property.

Why buy now

“I would say now is the perfect time for a plethora of reasons. One of the reasons is that we have so much money being put into the economy by the

Federal Reserve

that you’re going to see prices continue to rise, including rents, ”Anderson said.

Anderson notes that this means inflation has started. While this could be a bad thing for the US dollar and for tenants, it could also mean that for homeowners the debt burden resulting from loans and mortgages is reduced. On the flip side, owning a property also means that the property’s value will rise relative to inflation.

His optimism is reflected in the stock market. In a recent note, analysts at Bank of America said the real estate sector, which also covers non-residential properties, offered an “inflation protected return.” This helps explain why the sector went from the second worst performance in the S&P 500 last year to the second this year, said the team led by Savita Subramanian, chief US equities and quant strategist.

Anderson also points out that interest rates are currently quite low, which means it’s easier to get mortgage approval right now.

Eventually, the bubble could burst and the economy could deteriorate, which he says is likely to happen. But that would only lead to a reversal, where competition weakens but interest rates rise. As it becomes more and more difficult to obtain approval for a mortgage loan, more and more buyers are being excluded from the market.

“So when things change, it’s easy to find deals, it’s hard to get loans. Well, you already have a history with a bank, so you can buy these deals and they’ll give you loans because you’ve bought properties with them in the past, ”Anderson said.

He points out that even amid increased competition from people leaving cities and big companies like Zillow buying houses, there are still enough opportunities to find good deals.

“For example, a lot of people who were fed up with the moratorium on evictions are selling their properties because they don’t want to deal with it anymore,” Anderson said.

Companies like Zillow also outbid many properties, causing them to sell 2,000 homes, freeing up more inventory.

“So I think you’re going to see more and more rentals for sale. So there’s an opportunity out there if you’re willing to take the risk and do the job of owning a home,” Anderson said.

He notes that the federal moratorium on evictions has also ended. So, as long as a buyer doesn’t look into areas that may be subject to restrictive state-level policies, that shouldn’t be a problem. He advises investors who are considering investing out of state to look for states with better homeowner protection laws.

About Robert Valdivia

Robert Valdivia

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