What factors might investors want to be watching out for this quarter?
The economy and markets continue to rotate. There are still plenty of wild cards that could be played on a national and international scale. Yet, here are some of the trends to watch out for, and to not be duped by as new data comes out.
Peaking Rental Rates
While it looks like America continues to move towards being a renter nation, which should keep supporting sustainable rent increases, it’s best not to speculate.
Some have paid extreme amounts for rentals with the hope that they can clear out existing tenants and replace them with higher paying ones. If recent activity slows down, some could be stuck with a lot of vacancies, a bad reputation in the local community, and cash flow challenges.
The numbers should always work for the worst case scenario, as well as your most bullish forecasts.
Lengthier Build Times
The supply chain seems to be doing better and innovative solutions have smoothed out some of the recent challenges. And there is still a good amount of construction going on.
Contractors and all of those involved in the building process, from drawing plans to conducting inspections, installing utilities, and finishing out drywall all still seem to be pretty busy.
Without your own team that is going to prioritize your projects this could lead to many extra months in rehabbing or building properties. That needs to be built into the numbers upfront.
A Resurgence In Inflation
We shouldn’t be surprised if there is another surge in inflation.
Some might argue that there are some market manipulators out there intent on pushing inflation to the maximum possible. The Fed’s interest rate hikes only seem to be adding to this.
It is essential to continue to factor in inflation and rising costs on materials and labor in order to be able to maintain spreads and target returns.
Deep Discounts From Motivated Sellers
While some are still overpaying for properties, some sellers are already becoming highly motivated, and may accept deep discounts for immediate cash.
This is the time to be disciplined and to hold out for those real deals. They are there for those with the capital.
Tax time will be coming up fast. Before that, we have end of year deadlines to maximize deductions, write offs, and contributions.
It is common to see a surge in spending and investing at the end of the year to account for this, as well as flowing through end of year bonuses.
This is the time of year that often throws off investors who haven’t been through enough cycles. The real estate market is very seasonal. It is common to see buyer activity to slow, and a dip in asking prices in October. There may be another rush of buying activity before the end of the year. Whether that is investing or for gifts. This data though, may not show up until the figures are published in the first quarter of 2023.
Find out more about investing in secured debt and real estate, go to NNG Capital Fund.