What You Should Know About Real Estate Investing in 2022

Real estate investing has been a popular way for Americans to build wealth for decades. Over the last 40 years, median home prices in the U.S. have increased by 416%, and mean prices have increased by 420%. This makes real estate one of the most profitable and secure investments available on the market. 

However, like any other investment, real estate has evolved significantly in recent years. Changing tenant preferences, regulatory compliance requirements, and uncertain economic conditions can make real estate investing in 2022 a challenging endeavor for new and experienced investors alike. That said, here is why real estate should still be a top choice for investors this year as well as three tips that investors should be aware of when purchasing their next property. 

Benefits of real estate investing

Real estate can provide investors with steady cash flow while appreciating in value

Any investor will gladly explain why it’s important to account for asset depreciation when calculating the value an investment can deliver. Real estate is a rare investment that allows investors to rent out the property to generate regular income while still appreciating in value. 

In other words, because real estate investments increase in value over time, when investors sell their property they generally can count on making a profit that covers the costs of purchasing, maintaining, or renovating it. And in the meantime, renting out their property is a way to quickly bring in revenue in the short-term.

Real estate investors receive a variety of tax benefits

Rental property ownership benefits investors but it also benefits the states and cities in which real estate is purchased and rented by making housing available to residents who are unable to or uninterested in purchasing property.

For this reason, state and federal governments regularly incentivize real estate investing through a variety of tax benefits for landlords. All expenses related to owning and maintaining a rental property — such as mortgage interest, property tax, operating expenses, depreciation, and repairs — are completely tax deductible. This makes managing a rental property more affordable for real estate investors.

Property value and rent typically match inflation rates

An important lesson that business owners and investors learned during the pandemic is that market forces can unexpectedly wreck profits and increase operating costs by a staggering amount. During periods of economic downturn, there are also unusually high levels of inflation. However, long-term real estate investments are often protected from the extreme effects of inflation and economic downturn. 

Recent research shows that, while other businesses suffered greatly during the pandemic, rent prices maintained their upward trajectory, albeit at a slower rate than before the pandemic. This further shows that rental property is a relatively stable and profitable investment even during periods of economic uncertainty. It also makes the rental property market increasingly attractive to risk-averse investors and rental property owners who wish to build alternative income streams while holding onto a valuable asset. 

3 tips every real estate investors should know

1. Embrace technology to improve the property management experience

Many of the pain points of owning a rental property revolve around collecting rent on time and keeping your finances organized. When landlords run their business using manual spreadsheets or paper documents, it’s easy to lose track of who’s paid and who hasn’t. 

Azibo is a free, all-in-one platform for landlord finances — offering everything from rent collection to banking and expense management to insurance and mortgage solutions. With Azibo, rental property owners can offer tenants flexible online payment options, including ACH bank transfer, debit card, and credit card. Azibo also simplifies tax preparation by helping landlords tag expenses by Schedule E category and assign them to specific properties.

2. Consider short-term rentals to capitalize on hybrid work arrangements

Even as workers return to offices, hybrid work arrangements are expected to remain popular in the long term. This means that employees who have the flexibility to work in different geographic locations are likely to take advantage of short-term rentals in popular cities and states. Landlords who own property in appropriate locations should consider maximizing the profitability of their investment by embracing short-term rentals.

However, fluctuations in rental prices and high turnover can make managing such rentals challenging. Azibo can help rental property owners overcome these hurdles by providing a flexible and easy-to-understand financial platform for rent collection, banking, and onboarding tenants. With Azibo, you can manage multiple short- and long-term rentals on a single platform. This makes it easy for landlords to switch between rental types depending on customer demand and market conditions. 

3. Monitor rising interest rates

Real estate prices have risen significantly over the past decade. This challenge has been exacerbated by rising interest rates — with more increases expected in the coming years. Real estate investors looking to expand their portfolio may want to purchase new properties or refinance their existing mortgages before the next interest rate hike. 

Azibo offers competitive rates and flexible financing options for real estate investors. We provide access to a wide range of quality lenders so you can find the right loan for your unique rental property needs.

Maximize your real estate investing ROI

When property buyers take the right approach to real estate investing, they can build a portfolio that generates passive income for owners while appreciating in value. These tips can help rental property owners make the most of their real estate investment. 

Interested in learning how Azibo’s free platform can help you manage your rental property finances more effectively?

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