Jhe 2022 housing market is tricky for real estate investors looking for income properties. It is also a difficult time to be looking to buy a house to live in.
But that doesn’t mean there aren’t opportunities to make money in real estate this year. Here are some ways to score significant wealth.
1. Selling a house and downsizing
If you’re a regular homeowner, you have a great opportunity to walk away with a bunch of cash by selling your home and downsizing it to a cheaper one. Because home values are so inflated nationally, the average homeowner is now sitting on $185,000 in home equity, Black Knight reports. And even if you don’t make money selling your home and buying a comparable one simultaneously, downsizing could produce very different results.
Imagine you are sitting on a house with a normal value of $500,000 with a mortgage balance of $200,000. In today’s market, you could manage to salvage $600,000 for your home. Sell at that price and you have $400,000 in your pocket (not including realtor fees and transfer taxes, if applicable). If you then take that stack of cash and use it to buy a $250,000 townhouse, you’ll walk away with a nice profit.
2. Sell an underperforming income property at full price
There is a high demand for short and long term rentals these days. But if you have an income property that hasn’t brought in a decent rent or is struggling to maintain, now might be the time to offload that investment.
Property values have increased by 18.8% over the course of 2021, according to the S&P CoreLogic Case-Shiller National Home Price Index. This is the largest increase in 34 years. And so there’s a good chance that if you put that income property on the market, you’ll get a decent price for it. From there, you can invest the proceeds of your sale in another property that could serve as a more robust source of income – or just pocket your profit.
3. Invest in the right REIT sectors
Believe it or not, you can make a lot of money in the real estate market without owning a property. If you stock up on REITs or real estate investment trusts, you could see your portfolio gain solid value over time. And since REITs typically pay above-average dividends, you can benefit from this additional income stream as well.
That said, some REIT sectors may be more prone to growth this year than others. The shift to e-commerce and remote working is fueling a huge need for data centers, so data center REITs could end up being a good buy. Likewise, the explosion in digital sales has led to strong demand for warehousing space, so industrial REITs could experience strong growth this year.
There’s a lot of money to be made in this year’s real estate market, whether you’re a regular homeowner or an investor looking to make a profit. Be sure to take advantage of record home prices and strong REIT opportunities to end 2022 on a high.
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