Why Now Is the Perfect Time to Start Active and Passive Real Estate Investing

Total Wealth Academy

544 followers

August 30, 2024

In today’s ever-evolving economic landscape, real estate remains a reliable and lucrative investment avenue. Whether you're considering diving into active investing—where you're hands-on with property management—or passive investing—where you benefit from the returns without the day-to-day involvement—there's no better time to start than now. Here’s why:

Strong Market Resilience

Historically, real estate has shown remarkable resilience, even during economic downturns. According to the National Association of Realtors (NAR), the U.S. housing market has experienced a 45% increase in home values over the past five years. Despite market fluctuations, real estate has proven to be a stable asset that can withstand economic uncertainty, making it a safer bet compared to other volatile investments like stocks or cryptocurrencies.

Record-Low Housing Inventory

The current U.S. housing market is characterized by historically low inventory levels. As of Q2 2024, the available housing inventory is 1.4 million units, down from 2.5 million units in 2019. This shortage creates a seller’s market, driving up property values and rental income potential. For active investors, this environment presents an opportunity to purchase properties at a lower cost and benefit from future appreciation. Passive investors can leverage this by investing in real estate investment trusts (REITs) or crowdfunding platforms that focus on high-demand areas, ensuring steady returns.

Rising Rental Demand

The demand for rental properties is at an all-time high. With homeownership becoming increasingly unaffordable for many, more people are turning to renting. A recent report by the Joint Center for Housing Studies at Harvard University highlighted that the renter population in the U.S. grew by 8.2% over the last decade, and this trend shows no signs of slowing down. For active investors, this translates to a consistent rental income stream, while passive investors can capitalize on this demand through REITs focused on residential properties.

Favorable Interest Rates

While interest rates have seen slight increases in 2024, they remain historically low compared to previous decades. The average 30-year fixed mortgage rate hovers around 6.5%, making it an opportune time to lock in a mortgage before potential future rate hikes. Lower borrowing costs enhance cash flow for active investors and improve return rates for passive investors investing in debt or equity real estate funds.

Diversification Opportunities

Real estate offers unique diversification benefits, reducing the overall risk of your investment portfolio. Unlike stocks or bonds, real estate investments are not directly correlated with the stock market. By diversifying into real estate, you mitigate the risk of market volatility, which is particularly beneficial in the current economic climate. For both active and passive investors, diversifying across different real estate sectors—residential, commercial, industrial—can provide a balanced and resilient portfolio.

Tax Advantages

Real estate investing comes with numerous tax benefits that can significantly enhance your returns. Active investors can take advantage of deductions such as mortgage interest, property taxes, and depreciation. Meanwhile, passive investors in certain REITs can benefit from favorable tax treatment on dividends. Additionally, the 1031 exchange allows investors to defer capital gains taxes when reinvesting in like-kind properties, making real estate a tax-efficient investment strategy.

Technological Advancements

The rise of technology has made real estate investing more accessible than ever. Online platforms allow investors to explore properties, analyze potential returns, and even invest in real estate projects across the country with a few clicks. For passive investors, real estate crowdfunding platforms provide opportunities to invest in large-scale projects with relatively small capital outlay, democratizing access to real estate investments.

The current market conditions make now an ideal time to start both active and passive real estate investing. With strong market fundamentals, rising rental demand, favorable interest rates, and technological advancements, the potential for high returns has never been better. Whether you prefer the hands-on approach of active investing or the simplicity of passive investing, the opportunities in today’s real estate market are too significant to ignore.

As with any investment, it's crucial to conduct thorough research and consult with financial professionals to ensure your strategy aligns with your financial goals. But with the right approach, real estate can be a powerful tool for wealth creation and financial security.

Here is where to begin:

Begin by speaking to a wealth coach at Total Wealth Academy. Just click here for a 10-minute discovery call to help you gain better insight on real estate investing. www.totalwealthacademygroup.com/wealthcoach

Then, join our FREE real estate investing class in person or online to help you kick start your journey to building a second stream of income. www.totalwealthacademy.com/class