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real estate market trends, investing in 2022

Investing in 2022: How to Profit in Today’s Racing Real Estate Markets

After a record-setting 2021, many are wondering about real estate investment trends in 2022. Where should we be positioning ourselves for the next big moves?

A recent Forbes article boiled down the predictions of several experts. 

Mortgage Rates Likely to Rise 

No surprise, but overall, experts anticipate mortgage rates to rise moderately.  With the Federal Reserve on deck to start a tightening cycle, the market will need to adjust to higher interest rates.  This is likely to put a damper on demand.  However, with rates still near generational lows, it is not expected to cause the market to slam on the brakes.

Price Appreciation Will Continue, but at a Slower Pace

The experts surveyed mostly concluded that prices will continue to rise in 2022 but at a slower pace. 

Affordable Housing Remains a Challenge

Also, no surprise, affordability will continue to be a flashpoint in many markets.  

Investing in 2022:  Is It Time for a Different Approach?

Long-time real estate investors can feel whiplashed by the intensity of the recent market.  Risk is high.  Buyers continue to cast off common sense to outbid each other on often-mediocre properties.  

So while it can be an optimal time to sell, it may not seem like a good time to re-invest.  Who wants to compete with wild-eyed buyers who have never lived through a downturn?

That’s why many experienced real estate investors are incorporating distressed real estate note investing as a way to diversify and reduce risk in this unusual market.  

Distressed Real Estate Note Investing

Investing in distressed or nonperforming notes allows you to create passive income or acquire property at a substantial discount. Here’s a summary of how this specialized strategy works.  

Banks are in the business of lending.  They are not in the business of owning property and restructuring mortgages.  So frequently, if a mortgage they own becomes delinquent for an extended period, they want it off their books.  Too much nonperforming debt is a red flag for Wall Street and investors, so these banks actively avoid holding on to these loans for long.  Instead, they are willing to sell the mortgage (distressed real estate note) at a steep discount so they can get back to their primary business of lending.

Hedge funds typically buy these nonperforming notes from the banks.  Some they will hold.  Additional notes are packaged and sold off to individual investors or institutions.

When you buy one of these notes, you essentially become the bank.  You can work with the buyer to restructure the loan and re-establish a passive income stream.  Or, if the buyer is not interested in keeping the home, you can negotiate a deed in lieu of foreclosure (which saves the owner from having the black mark of foreclosure on their credit).  In case of an abandoned property or uncooperative owner, you always have the option of foreclosing.  Once you regain title, you could choose to rent out the property or sell it.       

Many experienced investors find this is an excellent way to recycle their extensive knowledge.  Yes, there is risk, but by acquiring the note at a steep discount, you have a large cushion from which to revise mortgage terms or get compensated if you need to take possession of the home. 

Key Takeaway

With COVID mortgage forbearance expiring, we can expect to see more delinquencies going forward.  This can make positioning yourself in the distressed real estate note market all the more rewarding.

Interested in learning more about buying distressed real estate notes? 

With over $1 billion of notes purchased, Revolve Capital is an industry leader in the distressed real estate note market. We also specialize in helping individual investors participate in this unique niche.  Revolve Capital purchases its assets direct from banks, so you avoid third-party brokerage fees or problem notes. We also stand behind our notes with a buyer’s guarantee, that you are purchasing what our BPO’s show that you will receive.. Learn more and submit a buyer application at https://revolve-capital.com/buyer-application/.

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