With 2022 being a wild year for real estate investing, what does 2023 have in store?
That’s part of what we wanted to learn when we recently surveyed more than 100 of the top real estate investors in the U.S. about their habits, experiences with fix-and-flipping in 2022, and plans and predictions for 2023.
The results of the survey gave us insight into not only the minds of the best-of-the-best investors, but also at how they’re preparing for the upcoming year. And now we’re sharing those insights here in the hopes that it will help you be even more successful in 2023.
The Real Estate Market Will Slow Down
When we asked fix-and-flippers what the biggest trend in real estate investing would be in 2023, the most common answer was a market slowdown (18%).
This sentiment is backed by the numbers. According to a recent Forbes article, experts agree that both new and existing home sales will continue to fall. This is despite predictions that mortgage rates and home prices will also fall this year. This is in part because even if home prices do fall, they are expected to still be higher than in 2019.
The investors we surveyed also said they expect that, because of the market slowdown, less experienced fix-and-flippers may leave the industry. This, they predict, will open up more inventory and allow for more desirable prices.
Interest Rates Will Continue to Rise
Although 13% of fix-and-flippers we surveyed said they expect to be able to purchase properties for lower prices this year, they also expect interest rates to continue rising — at least for part of 2023. Many of them expect this to result in having to use creative financing options to continue scaling their fix-and-flip businesses.
Newer fix-and-flippers might have used cash-out refinancing to get the money for an initial investment. That option does not make sense for most people, though, with mortgage rates as high as they are. However, a home equity line of credit could be an option to at least get the funds needed for renovations to an investment property.
A business credit line or business credit card is another option. Since these are unsecured lines of credit, you’re not borrowing against your own home or other investment properties. Investors with a few flips under their belts could qualify for higher lines of credit, allowing them to make down payments or pay for renovations.
Investors with an established track record of successful fix-and-flips could also find some success with private loans. This is, of course, money borrowed from private investors who could be anyone from a family member to a dentist you met at a chamber of commerce event. Having a successful portfolio would give these investors peace of mind when it came to lending large sums of cash.
13% of fix-and-flippers surveyed said they expect to be able to purchase properties for lower prices in 2023.
Single-Family Rentals Will Continue to Boom
According to the investors we surveyed, they expect the single-family rental market will continue to boom. They also expect investors will improve property renovations to meet the requirements of the SFR market.
How do you know what renovations to make in order to create a top-of-the-line rental property? First, talk with your contractors. They may have already worked on rental properties and know what SFR investors are looking for.
Additionally, take a look at comps in the area that are SFRs. What types of fixtures are installed? What type of flooring do they have? What does the landscaping look like?
Finally, an easier solution is to work with a proptech company that already sells to real estate investment trusts and private SFR investors. This type of company can provide you with a scope of work, taking all of the guesswork out of the renovation process.