Pros and Cons of Buying an Investment Property in 2022


Pros and Cons of Buying an Investment Property in 2022

One of the most significant advantages of investing in property is its ability to hedge inflation and generate consistent income. However, there’s no denying that market conditions can make some seasons better to buy than others. When house prices are at their peak, investing would mean requiring a longer time to pay off your debt if the market crashes. Therefore, we highly recommend you invest in comprehensive property management services to maximize your property’s potential.

Are you wondering what the pros and cons of buying an investment property in 2022 are? Stick around till the end of this article to find out.

Common Types of Investment Property

Long Term Rentals

Long-term rentals are the most common type of investment property on the market. It involves signing a lease that grants tenants residential rights for an agreed monthly payment. These arrangements usually last longer than six months and may be furnished or unfurnished.

They’re pretty popular amongst landlords because they guarantee consistent cash flow and have fewer vacancies. Also, long-term rentals are more hands-off because you don’t have to clean as often between guests. On the other hand, longer rentals mean more damage at the end of their tenancy period.

Short Term Rentals

Short-term rentals are generally living arrangements that last less than six months. AirBnBs and other similar vacation setups easily fall into this category of investment property, which requires less commitment from the tenants.

Since occupants are around for a short time, these rentals are often furnished, with landlords arranging cleaning between each guest. Most landlords set up shop around popular tourist attractions because it helps with the traffic. One of the biggest draws to short-term rentals is that they’re more economical and provide more privacy for renters. Thus, property owners can make more money off a second house or a well-located vacation rental. However, rules and restrictions vary from one city to the next. So it would help to check with zoning mandates and tax policies before diving into this investment type.

Fix and Flip

If you’re a big fan of real estate TV shows, you might be familiar with fixed and flipped properties. Alternatively referred to as a ‘fixer-upper,’ this investment strategy involves buying a property, upgrading it, and putting it back on the market for profit. A vital part of this strategy is completing the renovation and sale a few months post-purchase.

However, it’s not as glamorous or as easy as the media portrays. Homeowners can encounter several problems during the process. One of the most common issues is spending an excess amount on construction. Without the right expertise, you could take on a project that puts you underwater. Otherwise, this investment option is a quick way to turn an unwanted property into a significant sum of cash.

Now that we’ve established the types of investment properties, let’s move on to the pros and cons of investing in real estate:

Pros and Cons of Buying in 2022

Pros

  • Higher Equity

In 2022, buying a house is still relatively cheap following the post-pandemic mortgage rates. Through 2021 we saw a surge in home prices because of the ease of acquiring property. Although, as we progress further into the year, these record-low interest rates will not hold with the increasing buyer population. Thus, investors lucky enough to purchase a property soon can expect to see higher equity on their investment.

  • Safeguard against Inflation

Historically speaking, real estate often stays one step ahead of inflation. Its less volatile nature makes it a safer bet for retirees and people with low-risk tolerance. With home prices surging in 2022, it’s evident that property will significantly appreciate by the end of the year.

  • Alternative Income Source

Another advantage of buying a rental property is that it is an alternative income source. We’re in the midst of a seller’s market with many people opting to rent because of prices. For landlords that can afford to buy, it means charging higher rent due to demand and dealing with fewer vacancies.

Cons

  • High Buy-in

The housing market is experiencing a lot of pressure this season. Since demand outpaces supply in strides, buying a home is increasingly unaffordable in many cities. Even with cheap and accessible financing, brutal bidding wars can leave investors with nothing to show.

  • Keeping up with Maintenance

You still need to keep up with maintenance regardless of what investment property you buy. A poorly kept rental will struggle to make money even in a seller’s. Thus, it might be a lot of work without the help of a property manager.

Is 2022 the Right Time to Buy?

Unfortunately, there’s no right or wrong answer to this question. As investors have different risk and reward expectations, buying a home in 2022 depends on the owner. With home prices and mortgage rates rising quickly, some buyers hesitate to pay a premium. On the other hand, with demand following closely, other investors see 2022 as the prime investment time before interest rates skyrocket.

Either way, buying a house is a significant commitment that requires careful consideration. It would help if you took the time to evaluate your options, preferably with a professional with a better market layout.

Conclusion

For the most part, real estate is a long-term game and when you buy into the market is crucial. It would help if you familiarize yourself with the pros and cons of buying an investment property in 2022 before deciding. Besides that, you should also understand the different investment options and which one works best for you.

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