{"id":3529,"date":"2022-10-05T04:08:35","date_gmt":"2022-10-05T04:08:35","guid":{"rendered":"https:\/\/frankbuysphilly.com\/11-ways-to-invest-in-real-estate-during-a-housing-correction\/"},"modified":"2022-10-05T04:08:35","modified_gmt":"2022-10-05T04:08:35","slug":"11-ways-to-invest-in-real-estate-during-a-housing-correction","status":"publish","type":"post","link":"https:\/\/frankbuysphilly.com\/11-ways-to-invest-in-real-estate-during-a-housing-correction\/","title":{"rendered":"11 Ways to Invest in Real Estate During a Housing Correction"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div :class=\"{ 'hidden': $store.proContent.showFullPrompt() }\">\n<section class=\"px-4 relative border border-slate-200 mobile-toc lg:hidden\" x-data=\"{open:false}\">\n<button class=\"flex items-center gap-4 my-2 border-none w-full\"><br \/>\n<svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-6 w-6\" fill=\"none\" viewbox=\"0 0 24 24\" stroke=\"currentColor\" stroke-width=\"2\"><path stroke-linecap=\"round\" stroke-linejoin=\"round\" d=\"M4 8h16M4 16h16\"\/><\/svg><\/p>\n<h2 class=\"font-semibold text-slate-800 text-base m-0 js-toc-ignore\">In this article<\/h2>\n<p><\/button><\/p>\n<\/section>\n<p><span data-preserver-spaces=\"true\">We are in a housing correction. It remains to be seen what this means for prices in the national housing market, but some trends are becoming clear. We can gather important insights from these trends to inform our investing strategy and help us all navigate and earn great returns during the correction.<\/span><\/p>\n<h2><span data-preserver-spaces=\"true\">The National Housing Market Has Peaked<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">First and foremost, the national market has likely peaked in absolute terms. In plain English, most markets hit their all-time highs in\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/june-2022-housing-market-statistics\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">June<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0and have started to come down month-over-month since then. The housing market is seasonal, and prices typically peak in the summer and then start declining in absolute terms. But peaking in June is a little early and reflects the beginning of a correction, in my opinion.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Due to this seasonality, the housing market is often measured in year-over-year terms (i.e., what happened in August 2022 vs. August 2021.) When we look at the national housing market this way, it is still up about 6% year-over-year. That would be considered rapid appreciation in a normal year, but this represents a massive deceleration from the growth rates we\u2019ve seen over the last few years. Just a few months ago, in May 2022, year-over-year appreciation was over 15%!\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Of course, everyone wants to know if the national housing market will turn negative year-over-year, but we just don\u2019t know. In terms of where we\u2019ll end 2022, I think it\u2019s a toss-up. We\u2019ll either see very modest growth rates or slightly negative growth rates for the national housing market at year\u2019s end. It is worth noting that in August, San Francisco and San Jose, California, were the first two markets to show year-over-year declines. In terms of 2023\u2014it\u2019s too hard to tell right now.<\/span><\/p>\n<h2><span data-preserver-spaces=\"true\">The Real Story is Within Individual Markets<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">The above answer about the national housing market might not be satisfying, but in some ways, what happens with the national housing market doesn\u2019t matter. Well, it matters, but by only paying attention to the national housing market, you miss the most important story about the housing market: the discrepancy between markets.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">In some markets, dynamics have barely changed and still look like a strong seller\u2019s market. In others, the shift towards a buyer\u2019s market has been dramatic.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">To measure this, I like to look at two lead indicators for housing prices: inventory and days on market (DOM). When either of these metrics is low, it indicates a seller\u2019s market. When they are high, they indicate a buyer\u2019s market.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">First, let\u2019s take a peek at Philadelphia, Pennsylvania. In the chart below, you\u2019ll see that inventory remains extremely low in a historical context and hasn\u2019t really increased at all\u2014indicating this metro area is still in a seller\u2019s market.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Philly isn\u2019t alone. Many cities (predominantly in the midwest and northeast) look this way. Check out Boston, Massachusetts; Chicago, Illinois; Hartford, Connecticut; Cincinnati, Ohio; Madison, Wisconsin; and the many others still seeing pandemic-level inventories.<\/span><\/p>\n<figure class=\"wp-block-image size-full\"><picture class=\"wp-image-145038 sp-no-webp\" title=\"Worried About the Market? Here Are 11 Ways to Invest During a Housing Correction 2\"><source srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.03.28-AM.webp 919w,https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.03.28-AM-300x207.webp 300w,https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.03.28-AM-768x531.webp 768w\" sizes=\"(max-width: 919px) 100vw, 919px\" type=\"image\/webp\"><source srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.03.28-AM.png 919w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.03.28-AM-300x207.png 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.03.28-AM-768x531.png 768w\" sizes=\"(max-width: 919px) 100vw, 919px\" type=\"image\/png\"><img decoding=\"async\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.03.28-AM.png\" loading=\"lazy\" class=\"wp-image-145038 sp-no-webp\" title=\"Worried About the Market? Here Are 11 Ways to Invest During a Housing Correction 2\" alt=\"philadelphia all homes for sale\" height=\"635\" width=\"919\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.03.28-AM.png 919w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.03.28-AM-300x207.png 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.03.28-AM-768x531.png 768w\" sizes=\"(max-width: 919px) 100vw, 919px\"\/><\/source><\/source><\/picture><figcaption><em>All Homes for Sale in Philadelphia, Pennsylvania (2012-2022) \u2013 Redfin<\/em><\/figcaption><\/figure>\n<p><span data-preserver-spaces=\"true\">On the other hand, let\u2019s look at some of the \u201cwinners\u201d of the pandemic era. Below is the monthly inventory graph for Boise, Idaho, one of the poster children of rapid appreciation. Notice a difference here? Not only has inventory started rising, but it\u2019s also risen above pre-pandemic levels. This strongly indicates that Boise has shifted to a buyer\u2019s market. Other cities seeing rapidly rising inventory are low-affordability cities like Austin, Texas; Las Vegas, Nevada; San Francisco, California; and San Jose, California.\u00a0<\/span><\/p>\n<figure class=\"wp-block-image size-full\"><picture class=\"wp-image-145036 sp-no-webp\" title=\"Worried About the Market? Here Are 11 Ways to Invest During a Housing Correction 3\"><source srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.31-AM.webp 927w,https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.31-AM-300x206.webp 300w,https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.31-AM-768x526.webp 768w\" sizes=\"(max-width: 927px) 100vw, 927px\" type=\"image\/webp\"><source srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.31-AM.png 927w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.31-AM-300x206.png 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.31-AM-768x526.png 768w\" sizes=\"(max-width: 927px) 100vw, 927px\" type=\"image\/png\"><img decoding=\"async\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.31-AM.png\" loading=\"lazy\" class=\"wp-image-145036 sp-no-webp\" title=\"Worried About the Market? Here Are 11 Ways to Invest During a Housing Correction 3\" alt=\"all homes for sale boise\" height=\"635\" width=\"927\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.31-AM.png 927w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.31-AM-300x206.png 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.31-AM-768x526.png 768w\" sizes=\"(max-width: 927px) 100vw, 927px\"\/><\/source><\/source><\/picture><figcaption><em>All Homes for Sale in Boise, Idaho (2012-2022) \u2013 Redfin<\/em><\/figcaption><\/figure>\n<p><span data-preserver-spaces=\"true\">We don\u2019t know what will happen with prices in these markets, but it can be helpful to look at lead indicators like inventory and DOM to get a sense of the varying dynamics. I recommend everyone reading this goes and does some research on their own market.\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.redfin.com\/news\/data-center\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Redfin has a great tool for this.\u00a0<\/span><\/a><\/p>\n<p><span data-preserver-spaces=\"true\">However, I want to caveat this data by explaining that these metrics only describe the current situation and provide an outlook for the next few months. Inventory and days on market say nothing about the long-term prospects of any of these markets. For that, you need to understand population growth, supply and demand, and job\/wage growth.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">I call this out because many markets that are now seeing the biggest potential for correction are cities that may still be good long-term opportunities. Austin is a perfect example of this. Austin grew really quickly over the last few years, and for good reason! The city has enormous economic and population growth and shows no signs of slowing down. But, perhaps home prices grew too quickly and could see a \u201creset\u201d in prices (declines) before starting to grow again (probably when interest rates go down again, at some point.)<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">On the other hand, some markets that are more \u201cstable\u201d at the moment, like Chicago, have seen modestly declining populations over the last few years, which could hamper future price growth.\u00a0<\/span><\/p>\n<h2><span data-preserver-spaces=\"true\">Overall, Housing Prices Are Set to Decline<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">Overall, I think we\u2019re likely to see housing prices decline in absolute terms over the coming months.\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/the-fed-wants-a-housing-correction\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Rising interest rates<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0have depleted affordability in the market. With recent events and persistent inflation, it seems that rates will stay high for the foreseeable future. I am not convinced the national market can withstand sustained downward pressure exerted by low affordability. Something has to change, and if rates stay high for a while, as it now seems they will, the thing that has to change is housing prices.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">That said, I still don\u2019t think we\u2019ll see a \u201ccrash\u201d (declines greater than 20%.) There are a lot of reasons for this, such as better lending practices, long-term supply shortages, etc. But one emerging trend that could provide a backstop for price declines is a sharp drop-off in new listings.\u00a0<\/span><\/p>\n<figure class=\"wp-block-image size-full\"><picture class=\"wp-image-145037 sp-no-webp\" title=\"Worried About the Market? Here Are 11 Ways to Invest During a Housing Correction 4\"><source srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.47-AM.webp 919w,https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.47-AM-300x207.webp 300w,https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.47-AM-768x531.webp 768w\" sizes=\"(max-width: 919px) 100vw, 919px\" type=\"image\/webp\"><source srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.47-AM.png 919w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.47-AM-300x207.png 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.47-AM-768x531.png 768w\" sizes=\"(max-width: 919px) 100vw, 919px\" type=\"image\/png\"><img decoding=\"async\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.47-AM.png\" loading=\"lazy\" class=\"wp-image-145037 sp-no-webp\" title=\"Worried About the Market? Here Are 11 Ways to Invest During a Housing Correction 4\" alt=\"national new listings\" height=\"635\" width=\"919\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.47-AM.png 919w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.47-AM-300x207.png 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/10\/Screen-Shot-2022-10-04-at-3.02.47-AM-768x531.png 768w\" sizes=\"(max-width: 919px) 100vw, 919px\"\/><\/source><\/source><\/picture><figcaption><em>New Listings Nationally (2019-2022) \u2013 Redfin<\/em><\/figcaption><\/figure>\n<p><span data-preserver-spaces=\"true\">This graph is very telling (take note of the scale on the vertical axis, but still!) People just\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/lock-in-effect-real-estate-market\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">don\u2019t want to sell their houses right now<\/span><\/a><span data-preserver-spaces=\"true\">. The housing market is not the stock market, and when homeowners are faced with the prospect of selling into an adverse market, they just opt out.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Unlike in 2008, the vast majority of Americans are in a good position to service their debt. Many Americans will opt to stay in their homes and wait out the rough market. This is particularly appealing because over\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/finance.yahoo.com\/news\/redfin-reports-nearly-one-third-120000561.html#:~:text=SEATTLE%2C%20April%2019%2C%202022%2D%2D(,technology%2Dpowered%20real%20estate%20brokerage.\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">half of American homeowners have mortgage rates under 4%.\u00a0<\/span><\/a><span data-preserver-spaces=\"true\">Who wants to sell into a declining market, only to have to rebuy with a much higher interest rate? It seems like many homeowners are rejecting that idea.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">That\u2019s how I see the market right now. Market dynamics are changing rapidly, but I hope sharing my current read on the housing market is helpful to you. The market is cooling off rapidly, and there is a huge variance between regional markets, but a \u201ccrash\u201d remains unlikely. Just for reference, most forecasters see the national housing market landing somewhere between +3% and -8% in 2023 on a year-over-year basis. Not a crash, but there is potential for a significant correction.<\/span><\/p>\n<h2><span data-preserver-spaces=\"true\">11 Ways to Invest During the Housing Correction\u00a0<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">The question then becomes, how do you invest in this type of market? Here are a few of my thoughts:\u00a0<\/span><\/p>\n<h3><span data-preserver-spaces=\"true\">1. Invest in hybrid cities<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">Ideally, cities that offer decent cash flow, are seeing stable prices right now, and have decent long-term prospects. These are often smaller cities like Madison, Wisconsin; Birmingham, Alabama; and Virginia Beach, Virginia.<\/span><\/p>\n<h3>2. Negotiate with sellers<\/h3>\n<p><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/learn\/negotiating\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Negotiate<\/span><\/a><span data-preserver-spaces=\"true\">! If you want to invest in markets with great long-term prospects, look for under-market deals. Once prices start to drop, sellers sometimes panic, and you can often find value. The data might not show this, but every experienced investor I know says that sellers are willing to negotiate right now. If you can buy below market rates, that offsets the risk of modest declines in the coming months. In this type of market, it\u2019s more important than ever to\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/agent\/match\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">use an investor-friendly agent<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0who can help you navigate local market dynamics. BiggerPockets can help you find one for free\u2014just use the link above.<\/span><\/p>\n<h3>3. House hack<\/h3>\n<p><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/real-estate-investing\/house-hacking-strategy\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">House hacking<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0is pretty much always a good option, in my opinion.\u00a0<\/span><\/p>\n<h3>4. Stay away from flipping<\/h3>\n<p><span data-preserver-spaces=\"true\">Don\u2019t start\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/category\/real-estate-investing-strategies\/flipping-houses\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">flipping houses<\/span><\/a><span data-preserver-spaces=\"true\">. I don\u2019t flip houses, so I\u2019m biased, but I wouldn\u2019t advise anyone to start right now. There is market risk, labor risk, and material cost risk. Experienced players are probably still doing well, but I don\u2019t think it\u2019s a good time for newbies to start flipping.\u00a0<\/span><\/p>\n<h3>5. New construction might be lucrative<\/h3>\n<p><span data-preserver-spaces=\"true\">Prices on newly constructed homes are likely to decrease more than existing homes and could provide a relatively good value for long-term investors. Traditionally, new construction isn\u2019t a great option for rental property investors, but with many developers offering incentives and discounts, I\u2019m keeping an eye on newly constructed homes that are unique and in good areas. I don\u2019t like cookie-cutter developments in the suburbs. It\u2019s too hard to differentiate your property to prospective tenants and can create a race to the bottom in adverse market conditions.\u00a0<\/span><\/p>\n<h3>6. Beware of short-term rentals<\/h3>\n<p><span data-preserver-spaces=\"true\">I think high-priced vacation rental markets are going to get hit the hardest. During the pandemic, demand for second homes skyrocketed alongside interest from short-term rental investors. That demand (not prices) has come crashing back down to earth (I don\u2019t use that word lightly.) I worry that some STR investors bought at a bad time, and if demand falls off during a recession, there could be some forced selling. I never root for anyone to lose their shirt on a home they bought or an investment, but if that does come to pass, it could present buying opportunities.\u00a0<\/span><\/p>\n<h3>7. Explore creative financing options<\/h3>\n<p><span data-preserver-spaces=\"true\">Consider creative financing options, like\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/2016-07-03-subject-to-real-estate\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Subject To<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0(SubTo) and\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/2013-11-05-seller-financing\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">seller financing<\/span><\/a><span data-preserver-spaces=\"true\">. These financing strategies offer the opportunity to buy real estate at lower rates than conventional mortgages and can help boost your spending power.\u00a0<\/span><\/p>\n<h3>8. Hold on to what you got<\/h3>\n<p><span data-preserver-spaces=\"true\">If you bought property within the last 10 years with low-interest debt, stay calm and carry on. You may give back some recent appreciation, but if your property cash flows, rent growth is improving your cash flow and might continue to do so into the future\u2014making it a solid long-term investment. It may sound boring, but deciding to hold a property that cashflows, has a low rate, and could see increased income is a good move in this market! The alternatives, such as a\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/guides\/how-to-refinance-your-mortgage#types-of-mortgage-refinances\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">cash-out refinance<\/span><\/a><span data-preserver-spaces=\"true\">,\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/1031-exchange\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">1031 exchange<\/span><\/a><span data-preserver-spaces=\"true\">, or selling and paying taxes, will likely yield worse returns than just holding on.\u00a0<\/span><\/p>\n<h3>9. Use cash, if you can<\/h3>\n<p><span data-preserver-spaces=\"true\">If you have the means, consider buying with all cash. We all know debt is expensive. If you believe the consensus that price growth is likely to come in between 3% and -8% next year, then investing in real estate using high-interest rate debt may actually be\u00a0<\/span><em><span data-preserver-spaces=\"true\">dilutive to your returns<\/span><\/em><span data-preserver-spaces=\"true\">\u00a0compared with buying in all cash in the near term. If you buy a property generating income at a 4%\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/cap-rate-real-estate\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">cap rate<\/span><\/a><span data-preserver-spaces=\"true\">, and assume 2% appreciation next year, then 6-7% interest rate debt will likely make your returns worse than if you buy all cash. Don\u2019t believe me? <\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Try it out on the\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/rental-property-calculator\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">BiggerPockets Rental Property Calculator<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0for yourself. Depending on your appreciation assumption, financing with debt may actually make your returns\u00a0<\/span><em><span data-preserver-spaces=\"true\">worse<\/span><\/em><span data-preserver-spaces=\"true\">\u00a0than buying all cash. Not many people have this option, but if you do, it\u2019s worth exploring.\u00a0<\/span><\/p>\n<h3>10. Become a private lender<\/h3>\n<p><span data-preserver-spaces=\"true\">As rates continue to rise, it could be a great time to shift at least part of your real estate strategy to the lending side. Returns on\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/private-money-lending-is-a-perfect-alternative\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">private lending<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0can be as high as 10-14% in the current market, and demand for private loans is likely to rise significantly in the coming months. Your worst-case scenario as a lender is that you become an equity holder in the real estate property you are lending to. If researched and executed carefully, lending may produce much higher returns than equity investments over the next 12 months, with a dramatically lower risk profile.<\/span><\/p>\n<h3>11. Time the market if you have a crystal ball<\/h3>\n<p><span data-preserver-spaces=\"true\">Lastly, you could try to time the market, but that is notoriously difficult and something I would not try to do. Instead, I stick to the basics and look for good long-term opportunities. Remember, property values are not the only way you make money with rental property investing. You could try to time the market, but in the meantime, you\u2019ll miss out on cash flow, loan pay down, and tax benefits. <\/span><\/p>\n<p><span data-preserver-spaces=\"true\">I\u2019m not saying you should buy just anything, but you need to factor in variables other than property prices when deciding where to allocate your capital. If you want to learn how to analyze deals with all of these metrics, you can check out my new book,\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/store.biggerpockets.com\/products\/real-estate-by-the-numbers\" target=\"_blank\" rel=\"noopener\"><em><span data-preserver-spaces=\"true\">Real Estate By The Numbers<\/span><\/em><\/a><span data-preserver-spaces=\"true\">, which I co-authored with BiggerPockets legend, J Scott.\u00a0<\/span><\/p>\n<h2><span data-preserver-spaces=\"true\">Conclusion<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">This advice is all based upon my current read of the market, so you may want to consider alternative strategies if you think my read is incorrect. With all the economic uncertainty right now, it\u2019s really difficult to know what will happen next, but I hope this analysis helps you interpret what is going on and how to invest in the current market. I\u2019d love to hear your take in the comment section below.<\/span><\/p>\n<div id=\"hero-block_62df1a82bfc88\" class=\"first:mt-0 hero-block    has-background has-slate-200-background-color has-text-color has-slate-900-color\">\n<div class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n<div class=\"relative z-30 lg:w-2\/3 \">\n<main class=\"py-4\"><\/p>\n<p class=\"has-slate-800-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Run Your Numbers Like a Pro!<\/p>\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:16px\">Deal analysis is one of the first and most critical steps of real estate investing. Maximize your confidence in each deal with this first-ever ultimate guide to deal analysis. <em>Real Estate by the Numbers<\/em> makes real estate math easy, and makes real estate success inevitable. <\/p>\n<p><\/main>\n<\/div>\n<div class=\"lg:w-1\/3 first:mt-0 relative h-full lg:flex lg:items-center\">\n<picture class=\"object-cover w-full relative z-20 my-0  rounded-md sp-no-webp\" title=\"Worried About the Market? Here Are 11 Ways to Invest During a Housing Correction 5\"><source srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/REBN_cover_mockup_01-e1663957420549.webp\" type=\"image\/webp\"><source srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/REBN_cover_mockup_01-e1663957420549.png\" type=\"image\/png\"><img decoding=\"async\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/REBN_cover_mockup_01-e1663957420549.png\" class=\"object-cover w-full relative z-20 my-0  rounded-md sp-no-webp\" title=\"Worried About the Market? Here Are 11 Ways to Invest During a Housing Correction 5\" alt=\"real estate by the numbers\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/REBN_cover_mockup_01-e1663957420549.png\"\/><\/source><\/source><\/picture>\n<\/div>\n<\/div>\n<\/div>\n<p class=\"italic\"><b>Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n<\/div>\n<p><br \/>\n<br \/><a href=\"https:\/\/www.biggerpockets.com\/blog\/invest-during-correction\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In this article We are in a housing correction. It remains to be seen what this means for prices in the national housing market, but some trends are becoming clear. We can gather important insights from these trends to inform our investing strategy and help us all navigate and earn great returns during the correction. [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":3530,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[33,1],"tags":[],"_links":{"self":[{"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/posts\/3529"}],"collection":[{"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/comments?post=3529"}],"version-history":[{"count":0,"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/posts\/3529\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/media\/3530"}],"wp:attachment":[{"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/media?parent=3529"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/categories?post=3529"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/frankbuysphilly.com\/wp-json\/wp\/v2\/tags?post=3529"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}