If you own a home or have been interested in buying one, you are aware of the sizeable U.S. residential real estate downturn. Sales numbers are dropping to their lowest rates since 2020, but interest rates continue to rise to around 6.5%. This scenario doesn’t mean investors should look to another option viewed as less volatile.
Take real estate investment trusts (REITs), for example. REITs are not just a platform for investing in residential real estate, offering properties such as retail spaces, large malls, hotels, apartment buildings, office space and hospitals. And though home prices continue to be high, other real estate categories are not as overvalued, potentially shielding investors from the risk of steep price declines.
Investors have not given up on the residential market, using financing options to take advantage of low housing inventory and turning properties into rentals. This strategy contributes to the high housing prices seen in the past couple of years.
According to property intelligence data company CoreLogic, the investor share of single-family homes sold in the first quarter of 2022 reached 28%, 11% over the same period in 2021. Its data also showed that investors with a thousand or more homes bought 3% of houses in 2021 and so far in 2022, compared to 1% in previous years.
Major real estate players like Redfin Corp. and Offerpad Solutions Inc. also bought homes on a large scale. Zillow Group Inc. fell on its face in this endeavor, alienating real estate agents who stopped advertising with a company they believed was competing against them. “The supply shortage is also an advantage for landlords,” Redfin economist Sheharyar Bokhari said. “Many people who can’t find a home to buy are forced to rent instead.”
Real estate billionaire, author and sales trainer Grant Cardone sees opportunity in the current market.
“I believe we are entering the BEST real estate market opportunity since 2008. With the Fed raising interest rates, it has sidelined home buyers, which means prices are going to pull back. If you are an end-user looking to enter the housing market, now is a great time to buy a house cheaper than it would have been at the beginning of the year. You should look for people who late last year or early this year were hoping to make a quick flip and had an adjustable loan. They are waking up without a market to sell into and payment on their loan that is doubling,” he said. “Also look for institutions who have already written much of their portfolios down and will bring a lot of product/inventory to the market in the last quarter of this year.”
Cardone, the former Undercover Billionaire on the Discovery Network and a CEO or partner with seven privately held companies, put a stamp on his belief that investors need not run from real estate investing by saying, “I am an aggressive buyer through the end of the year and next year of income-producing real estate.”
Of course, not everyone has the cash on hand to buy up discounted properties. A growing number of investors are turning to more passive options like Cardone’s managed real estate funds through Cardone Capital, which has already raised approximately $1 billion from nearly 12,000 accredited and non-accredited investors and boasts a portfolio comprised of roughly 12,000 multifamily units and over 235,000 square feet of commercial office space.
Some investors are even getting in on the market with as little as $100 through the Jeff Bezos-backed real estate investing platform that sells shares of single-family rentals. The company has already funded 203 properties with a value of more than $75 million.