Why New Build Investing Might Not Be the Best Choice in 2024
Hey, everyone, Josh Perez here, and today I want to talk about a significant shift in the real estate investment landscape. It's essential to keep up with the latest trends, and in 2024, one strategy that may not work as well as it used to is new build investing.
From a pure investment standpoint, it's going to be very hard to justify the purchase of new build properties in the next 12 months.
The real estate market is constantly evolving, and right now, the dynamics have changed. Here's why I believe new build investing might not be the most attractive option in the next 12 months.
1. Rising Interest Rates: One of the key factors to consider is the rapid increase in interest rates. These rates are not expected to drop significantly in the near future. As a result, many potential investors are hesitating, and it's becoming more challenging to make a strong case for purchasing new build properties.
2. Limited Resale and Refinance Opportunities: New build investments used to promise great resale and refinance opportunities. However, the landscape is shifting. These types of investments are becoming less appealing in the current market environment.
3. Cashflow Deficits: Long-term ownership of new build properties can lead to substantial cashflow deficits. These deficits can burn a significant hole in your pocket. If you've seen your property's value increase substantially since your purchase, you might be able to tolerate this. But if you're close to breaking even once the project is complete, it can be risky.
4. Builder Pricing: It's crucial to watch how builders price their properties. If their pricing isn't aligned with the current state of the market and the projected trends for 2024, it might be wise to hold off on new build investments.
So, what should you consider instead? Here are a few alternatives:
1. Explore Larger Multifamily Apartments: Larger, multifamily apartments can be a solid investment option. They offer better cashflow and are less susceptible to market fluctuations compared to new build properties.
2. Secondary and Tertiary Markets: Expanding your search to secondary and tertiary markets can be a game-changer. These markets often provide excellent opportunities for investment and growth.
3. Private Lending: Another option to explore is becoming a private lender. This allows you to earn a return on your investment without the hassle of property ownership.
In conclusion, while new build investments have been popular in the past, the changing dynamics of the real estate market, including rising interest rates and potential cashflow deficits, may make them less appealing in 2024. It's essential to adapt to the evolving market conditions and explore alternative investment options that align better with the current landscape.
Whether you consider multifamily apartments, secondary markets, or private lending, there are plenty of avenues to explore for a successful real estate investment strategy in 2024.
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