Real estate investors face more risks. some economic headwindsThis includes rising insurance rates, coupled with high housing and borrowing costs.
“It’s not a great environment for investors today,” Aaron Drucker, senior director at digital mortgage company Milo, told FOX Business.
Sundae’s senior vice president of revenue, Shaun Greer, said the riskiest properties are those that have a much higher median market sales price than the median market sales price since then. Properties priced below are the least risky for rehabilitation.
Drucker noted that it’s also important to pay attention to properties that require flood insurance.
For example, if a property is in a flood zone, which is likely in coastal areas such as Miami, investors will need flood insurance, which is rising in price.
Natural catastrophes like Hurricane Ian “put additional pressure on premiums,” he said, noting that “many Florida insurers have raised premiums to offset losses from Hurricane Ian and provide for future claims.” should be raised,” he added.
Many homeowners saw their rates go up due to policy changes last year. National Flood Insurance Program, It provides flood insurance for property owners, renters, and businesses.
Another problem facing investors is mortgage interest rateAccording to LendingTree, “the lender is exposed to more risk when lending money to real estate investors,” which is why investment properties are usually more expensive than homes used as primary residences.
Drucker says investors typically pay 2% to 3% more than a major mortgage.
Aside from rising interest rates, investors are also facing tougher borrowing requirements, according to LendingTree.
Mr. Greer told Fox Business that higher interest rates have reduced “the level of confidence that when an investor puts a home for sale, it will sell.”
moreover, housing prices, Drucker said although it has cooled, it is still high.
Nationally, prices rose 13% year-over-year in August, according to the S&P CoreLogic Case-Shiller index. However, it is still down from his 15.6% rise in July.
“Most markets have not experienced price pressure as inventories remain stubbornly low,” he added.
New listings plunged 22% last month, the biggest drop since May 2020, according to data from real estate broker Redfin.
What should investors look for?
Greer said investors can reduce risk by buying homes that can be rented as long-term or short-term rentals during the winter sales months.
Investors should also look for more in-demand locations, such as near schools and universities. It also needs to look for areas with net overall population growth, including markets that were growing pre-pandemic, he added.