Real estate investing has been and is going through some changes in 2023. Changes not only in how the different strategies are handled (wholesaling, buy and hold, and fix and flip,) but also changes in perceptions and investors’ awareness.
The interesting trend among real estate investors is “cautious optimism,” which is quite different from the real estate “slump” cycles in the past, where real estate investors took a step back. Instead under the “cautious optimism,” investors are looking more at the long term approach to real estate investing, by riding out the current slump and repositioning and tapping into new resources and strategies.
Historically, real estate investing has followed a cycle of slump and decline every 10-15 years. However there are 3 factors that contribute to the “cautious optimism” and prevent a serious “slump” in the real estate industry in 2023:
- Low inventory: the supply of properties is not sufficient for the demand. A new group of buyers has entered the market in the last few years (the millennial generation) and a shift in population to certain areas of the USA has created an increase in demand with not enough properties to go around.
- Global market exchange: the exchange across markets of money and investments is much easier nowadays than in the past. USA has historically proven to be a better and more stable economic and political market than other nations, therefore a lot of investors prefer investing in the USA than their own Country.
- Technology and AI (Artificial Intelligence): advancements in technology and AI have created better systems and automation for businesses in general and real estate has definitely gained a lot of momentum because of this. Virtual real estate investing is not only possible, but it is becoming mainstream.
3 Emerging Real Estate Investing Strategies in 2023
As a real estate investor, your focus is to facilitate supply and demand of properties. Basically allocating and restoring properties to the right buyers, tenants or investors.
There are 3 main strategies we see really gaining attention in 2023:
- OPM with OPR (also called Novation) – OPM (Other People’s Money) and OPR (Other People’s Resources) combined together can provide 100% financing instead of using “bank financing” with higher than average interest rates. For instance, using seller’s financing in conjunction with contractor’s manpower, you can structure a fix and flip creatively that you can either refinance or keep as a rental with the BRRRR method (Buy-Rehab-Rent-Refinance-Repeat.)
- Rental Arbitrage – this was also called “Sandwich Lease,” when it came to long term rentals. With short term (i.e. AirBnb) and mid term rentals, you create the same scenario with arbitrage: basically by renting a property and sub leasing it for a higher amount to a short or mid term tenant.
- Private Money and Money Partnerships – since bank financing is a little harder right now because of the lending requirements and interest rates, looking into alternative financing, like private money and money partnerships or joint ventures, has been on the radar of the majority of real estate investors.
As Warren Buffett said, “Be fearful when others are greedy, and greedy when others are fearful.”
This is a great time to invest in real estate: shifts in the markets, supply and demand, and changes in capital are opening up great opportunities for investors across the 3 main real estate strategies:
- Wholesaling (by moving inventory and providing properties to landlords and rehabbers;)
- Buy and Hold (renting properties to a demanding tenant market, especially for mid and short term rentals – arbitrage;)
- Fix and Flip (by restoring properties and placing them in circulation to help a shrinking inventory.)