Before Making Your Next Real Estate Investment...

Inflation is high, mortgage rates have doubled, capital markets are volatile, and the banking system is stressed.

You might be wondering if this a good time to invest in real estate?

The short answer is yes, but as with many things...it depends.

Here are a few thoughts to consider:

• Asset Class: Not all real estate is equal. Multifamily, industrial, and warehouse assets have all outperformed office space over the last several years. While past performance is not indicative of future results, market data analysis will provide valuable insight on trends (see Market & Submarket below).

• Asset Strategy: Core plus, value-add, or opportunistic (New construction & repositioning) each carry their own risk profiles. It's important to weigh risk-adjusted returns instead of focusing solely on opportunities with higher returns.

• Operator: There is no substitute for experience, especially in volatile and changing market conditions. It's easy to look like an expert when the market is hot.

• Timeline: Short-term flip vs long-term hold. Both strategies can still be profitable, but they have very different risk-profiles. In general, long-term holds in healthy & growing markets have less risk to market conditions than short-term flips.

• Market & Submarket: What story is the data telling you: vacancy, rent, current inventory, new planned inventory, absorption rates, demographics, jobs, etc.

• Debt Used: While long-term fixed debt is not always the right solution (particularly for commercial loans), short-term and variable rate debt increases risk. Interest rate caps can mitigate risk with variable rate debt.

• Personal Goals: Consider your risk tolerance as well as your current and future needs for cash flow and equity capture. Also, how active do you want to participate in operations? Would you be better off investing passively with more experienced operators?

Originally Posted on InvestedX.