Rising interest rates offer alternative investment opportunities

By September 24, 2018Lending

Yes, interest rates are rising, but real estate investors shouldn’t let that fact concern them very much. The real estate market continues to provide ample opportunities for savvy investors.

Slow and Steady

One of the great things about real estate is that it moves slowly. Yes, the market is on the rise, but it still provides a safe place for investors. Even though long-term trends can and do affect real estate both negatively and positively, it’s not very affected by the day-to-day occurrences in the markets.

Diversification

When compared to stocks and bonds, real estate tends to have a low correlation. Sometimes the correlation between the two is negative. This relationship between real estate, stocks and bonds provides investors with diversification for their portfolios.

Supply and Demand

Demand for real estate continues to outstrip supply as new property delivers lag behind historical averages across all property types. In spite of the increase in the cost of building materials and labor, new construction continues to go up with profitability projections for new property development staying in the mid-20s.

Obsolete Buildings Provide Opportunity

Buildings of all sorts — commercial, residential and industrial — are becoming obsolete as tenants and renters turn their backs on compartmentalized spaces. Instead, open floor plans with flexible spaces are in demand. Obsolete buildings provide an opportunity for redevelopment or they’ll need to be torn down before being developed with fresh ideas in mind.

Demographics are Positive

Millennials, who prefer to rent instead of buy, are poised to reach their highest levels of consumption over the next 20 years. Generation Z is right behind them and will be increasing the demand for housing.