Despite Upheaval, Real Estate Remains A Smart Buy For Long-Haul Investors
While purchasing real estate is often hailed as one of the smartest investments a person can make, sudden changes in the market and new legislation can derail even the most well-planned investment strategies.
In June, New York state legislators passed a number of new rent regulation laws that sent shockwaves through the real estate investment world. With new caps on yearly and temporary rent increases, many buyers were left concerned that the smart investments they had made would soon turn into money pits.
GFI Realty Services President Michael Weiser understands that the market can change quickly and leave investors feeling stranded. However, he believes that the key to prosperity is patience — and having the right team on your side.
“History has shown that so long as owners had the ability to hold on to their properties through a down period, they generally prevailed,” Weiser said. “Though NYC property owners may have a negative outlook right now, there is a school of thought that as time goes on, regulations will change, and in addition to the traditional inflationary hedge provided by real estate, profits and values will return.”
Weiser explained that in past downturns, owners who were overleveraged or unable to refinance their properties were the ones who ended up losing their investments. He advises owners to make sure their mortgage is not set to mature during the wrong part of the cycle, creating a situation in which they would be unable to refinance.
The best time for owners to act is now, Weiser said, especially for owners who are concerned about the new NYC tenant protection laws.
“The current long-term, low-interest rate environment is almost a perfect cure to the concerns caused by the Housing Stability and Tenant Protection Act,” Weiser said. “Right now, there are lenders writing seven- to 15-year term mortgages at extremely low rates.”
He added that owners who have shorter-term mortgages that are expected to mature in the next few years should be looking at refinancing now, even if it could mean incurring pre-payment penalties.
The U.S. is experiencing the longest economic growth cycle in the country’s history, due in part to the Federal Reserve's recent interest rate cuts. In October, the central bank’s Federal Open Market Committee lowered its benchmark funds rate by 25 basis points to a range of 1.5% to 1.75%. However, economic growth is slowing. Gross domestic product growth went from 3.1% in Q1 2019 to 1.9% in Q3 2019, which is why Weiser recommends aspiring investors act fast.
Weiser called on investors to be patient and seek out advisers who can help them weather the storm.
“While the fast cash-out that we have all gotten used to will probably not be available to today’s real estate investors, the long-term fixed-rate will provide the ability to endure and build wealth over time,” Weiser said. “At GFI, we understand what it takes to succeed in today’s market and we can help our clients wait out the downturns and achieve long-range benefits.”
This feature was produced in collaboration between Bisnow Branded Content and GFI Realty Services. Bisnow news staff was not involved in the production of this content.