What goes down, can also go up? If you’ve read the newspaper or watched any news in the last few months, you’re likely aware that mortgage interest rates are on the rise. As interest rates continue to climb, investing in real estate may sound scary right now. However, investing in real estate may be safer than most people think if done properly as part of a balanced investment portfolio. As with any investment or real estate purchase, you should consult with a professional advisor before proceeding. Real estate offers investment opportunities that may provide an income stream and long-term value appreciation. Investing in rental properties is also gaining more traction in the marketplace as the demand for rental homes continues to grow. With any investment, there are a few things to consider before jumping in. The risks, benefits, tax implications, and location of the real estate to name a few. What are some of the challenges?
The transactional nature of purchasing real estate may seem easy. However, that doesn’t mean managing or maintaining a real estate investment property is also easy work or without risk. Finding tenants, keeping up with repairs, and avoiding vacancies are all challenges you should expect to face. Additionally, it’s expensive up front and highly illiquid. Even if you’re financing through a lender, real estate investments still require around twenty percent or more down payment. Eventually, when you’re ready to sell, you will need a committed buyer. Once you agree on the price and terms of the sale, expect somewhere between 45 to 60 days before seeing the proceeds from the sale and that is if the deal goes smoothly. Even with all the risks and challenges, it’s not all bad and scary when you start to consider the benefits.
Owning real estate or rental property investments has many benefits that other investments may not. Inflation is currently at a 40-year high. As inflation continues to rise, so does the cost of goods, services, and the cost of rent. Investment rental properties may provide you with monthly rental income and the potential for long-term appreciation. Let us not forget about the tax advantages. When you own an investment property you can deduct several expenses, including your property taxes, mortgage interest, property management fees, property insurance, the costs of maintenance, the cost of repairs, and the money you pay to market your property to potential renters. If you were to sell your property for more than you purchased it for there are also tax benefits available that are not available with equity stocks. I could go on about the benefits that come with investment properties, but I’ll spare everyone the novel for now.
When it comes to location, Morgantown is one of the best-kept secrets. No one expects a small town in West Virginia to offer as much as it does. This is not only great for our community (we know and love) but also alluring for real estate investors. We have West Virginia University and two large regional hospitals providing regional stability and good jobs. Whether they are students, doctors, professors, coaches, or staff, everyone must live somewhere. This is great for landlords with apartments, townhomes, or even single-family home rentals. What about short-term rentals such as Airbnb or VRBOS? You may already own real estate that you can generate additional income by renting all or only a portion of your home for specific dates through these vacation rental sites. Hotels fill up quickly and charge exorbitant rates. Whether they are parents to our students or just fans of the rival team, a short-term rental is a popular choice for out-of-towners. Many of my clients also found success in renting property to travel nurses on short or even long-term contracts. Regardless of the situation, long-term or short-term, Morgantown is a great place to invest in real estate and I can only see it getting better from here.
Investing in real estate comes with many benefits but also challenges and risk factors like any investment opportunity. If you’re interested in learning more about real estate investments, talk to your real estate professional, financial advisor, attorney, or tax advisor. Until then, we’ll chat next week!
Eve Leombruno, 2023 MBOR President
