Should you worry about volatility in the real estate market?

On Behalf of | Mar 25, 2022 | Real estate transactions

Due to the many factors currently affecting the stock market and other investment strategies, people are looking to invest in less volatile markets. Many are now dipping a toe into the real estate industry to diversify their portfolios without assuming too great a risk.

Is it wise to sink funds into a property right now? Or is the real estate market also too uncertain for neophyte investors to navigate?

Real estate is a safer bet than most

Real estate volatility exists. For instance, around 2006 there was the housing crisis that emerged from our country’s last recession. Still, when weighing all factors currently at play, the real estate market is likely a safer bet than most other investment vehicles. 

One consideration is your intent for the property’s use. Do you want to upsize your current living arrangements? If so, you could do quite well if you find the right property at an affordable price. Then, if the bottom falls out of the housing market, you aren’t hung out to dry because you still have full use of your investment property.

Should you flip it or rent it?

If you are considering buying a property to fix up and flip for profit, the risk expands. The seller’s market is still hot right now – but that could change rapidly given current domestic and international geopolitical conditions. Flipping properties takes time, especially if you are doing the bulk of the work yourself in your spare time.

Renting to tenants generates an income stream that should more than cover your mortgage. Becoming a landlord has its own set of pitfalls, however. Bad tenants can put you in the hole if they renege on rent or damage your property. Evictions also take time and cost money. If you go this route, cover all contingencies by drafting an ironclad lease or rental agreement

Make sure that you and your investment are fully protected by seeking guidance from an experienced legal professional when drawing up the documents between you and your prospective tenants. The money spent now to get it right is but a fraction of the costs associated with evicting bad tenants and repairing property damage.