Real estate has been a golden investment opportunity for many years now — but is this still true in 2022? A global pandemic, saturated marketplaces, and shifting renter demand have changed the way real estate investors engage with the market. That said, there are many reasons why rental properties remain a solid investment strategy for new and experienced investors in 2022.
Why Real Estate Investing Is So Popular
Create a Source of Passive Income
As inflation and the cost of living continue to increase, younger investors have begun to explore new revenue streams, with 43% of Gen Z building a side hustle to keep up with expenses. Rental properties represent an opportunity for this generation and others to keep their day jobs while generating passive income on the side. New financing opportunities and low interest rates have opened the door for individual investors to capitalize on the rental property market.
Real Estate Usually Receives a High Return on Investment
Real estate is a relatively safe investment compared to other investment options. There’s less volatility in real estate markets compared to financial assets such as stocks, for example. Although ROI on stocks may be higher at times, stocks can lose value a lot faster compared to real estate — which will always have value given the intrinsic utility of land and shelter. This makes it more likely that landlords can recoup their investment should they find themselves in need of cash. Investors who aren’t cash-strapped can further maximize their returns by choosing the best moment to sell their rental property.
The flexibility to invest in different geographic areas and market segments also makes real estate a good investment option in 2022. As more Americans choose to work remotely, properties in warmer locations with strong internet connectivity may be in higher demand, for example.
Relatively low interest rates on mortgages compared to decades past also make mortgages affordable for now. Although no one can predict market cycles and government policy changes, interest rates don’t have much room to go anywhere but up from where they are today.
Take Advantage of Tax Benefits
Real estate investors have a wide variety of tax benefits and deductions they can apply to reduce their tax liability. However, landlords must take a proactive approach to make the most of their tax benefits. Instead of leaving things to the last minute, landlords should organize their finances early and understand the benefits they qualify for. Investors who successfully navigate this process can keep more of their profits through deductions and other tax benefits.
Keep Up With Rising Inflation Levels
Despite rising costs and interest rates, rental property homes remain a relatively affordable purchase for investors willing to finance their investment through long-term loans and mortgages. The benefit to doing this is to own an asset that retains its value as inflation hits new highs. Rental rates keep pace with inflation and investors can increase rents to keep up with rising costs. Additionally, as overall costs rise and remote work becomes the norm, more tenants are entering the rental market, therefore increasing the leverage that landlords have in deciding rental income.
How Investors Can Keep Up With a Rapidly Evolving Marketplace
Screen Your Tenants to Ensure Reliable Payments
With more people renting, landlords can afford to be choosy — and they must ensure that the tenants they select have the means to pay rent on time and can keep the property in good shape. Landlords can use tenant screening reports and background checks to view credit, criminal, and eviction reports for prospective renters. They can also ask for references to understand tenants’ relationships with previous landlords.
Stay Ahead of Changing Renter Payment Preferences
Payment preferences have changed significantly over the last few years. As seen below, payment preferences have remained fragmented even with the rise of convenient online payment options. This is because older renters still prefer traditional payment methods while younger renters show a preference for online payments. For investors who own multiple rental properties and want to make payments easy for every tenant, a flexible rent collection platform that accepts multiple payment methods — including credit or debit card, bank transfer, or paper checks — is a must. This helps landlords consolidate their payment processes while still offering multiple options for tenants with differing payment preferences.
Monitor Changing Regulations for Landlords and Tenants
Rental property investment has been an increasingly popular way for investors to generate passive income while diversifying their investment portfolios. However, this increase in real estate investment also means that states and governments must continually improve protections for tenants and landlords alike. These regulations can range from how a landlord is allowed to use security deposits to rules around evictions. At the same time, some states are passing laws to make it easier to develop new rental units and address today’s housing crisis. To maintain compliance, landlords must be aware of the federal and local real estate laws that apply to them and the properties across their entire portfolio.
Making the Most of Your Real Estate Investment
Despite rising inflation and increased interest rates, real estate still remains a solid investment. However, rental property owners must pay attention to changing market conditions to adjust rental rates, offer flexible payment methods to tenants, and capitalize on all of the new tax benefits that are available to them. If done correctly, rental property investment can be an effective way for investors to improve ROI while generating passive income that offsets the costs of owning and maintaining a property.
About Azibo
Azibo is the one-stop-shop financial services platform for the rental property market, providing world-class solutions for rent collection, banking, lending, insurance, and more. Our simple, modern tech tools level the playing field for independent landlords and their renters, property managers, and vendors. By leveraging data, automation, and innovation, we’re empowering everyone in the rental property ecosystem to save time, stay organized, and improve cash flow.
