Zillow's chief economist says short-term tactics like flipping homes no longer work as prices continue to rise. Instead, use these three easy ways to build wealth.
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In the current U.S. housing market, Zillow chief economist Skylar Olsen advises investors to look for areas with long-term prospects and avoid get-rich-quick schemes that involve flipping homes.
In an interview with Business Insider in March, she warned investors against participating in strategies that rely on short-term holds, saying, “When mortgage rates were down to 3% and home prices were soaring, it was no big deal. Flips were easy. But now that those two have reversed, flipping is no longer an easy strategy.”
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Olsen cited high mortgage interest rates, which can eat into a transaction's profit margins, especially when combined with closing costs, as a reason against home flipping.
And the latest news on home prices will be especially hard on first-time homebuyers and investors: The median home sale price in May was $442,500, up slightly from April's median, according to Realtor.com.
As a real estate investor, if you want to continue investing or are looking for alternative options, here are three ways to generate positive cash flow.
Buy, hold, and build assets
The simple fact is that people can't afford to buy homes. Mortgage rates above 6% and stilted home prices are suppressing affordability and demand.
Olsen believes real estate investors should adopt a buy-and-hold strategy to weather a turbulent market, building cash flow in the process.
By owning your home and spending more on your mortgage payments, you can increase your home equity, which is the difference between the value of your home and the remaining balance on your mortgage.
If you don't have the cash to buy a property, there are still ways to get into the real estate market.
If you're looking for a private way to invest in real estate, Fundrise offers public investors access to an extensive portfolio of private real estate investments. With an investment of just $10, you can gain access to Fundrise's proprietary eREIT, which is comprised of hundreds of well-located, rigorously vetted residential real estate assets.
Fundrise's eREIT is designed to capture the stable income generating potential of private real estate.
Arrived, an online platform that allows you to invest in shares in rental homes and vacation rentals, lets you get into real estate without the responsibility of property management.
Get started by browsing our handpicked homes, vetted for value and income potential. When you find a property you like, choose the number of shares you want to buy. With Arrived, you can start investing in real estate with just $100.
Read more: US car insurance costs have skyrocketed to a staggering $2,150 per year, but there's a smarter way to save. Here's how you can save $820 per year in just a few minutes (it's 100% free)
Leveraging Necessity-Based Commercial Real Estate
A report from private equity firm First National Realty Partners found that during times of market stress, it's possible to purchase great properties at discounted prices and to more easily acquire higher quality properties than in a normal market.
FNRP's platform gives accredited investors access to institutional-quality, grocery-based commercial real estate investments without the hassle of hunting down the deals themselves.
Plus, because investments are made based on need, they tend to perform well even during times of economic uncertainty.
Getting started is easy: just enter some quick information about yourself, your income and your investment goals, and you can start growing your wealth.
Optimize your portfolio
If you're looking for a way to get started in real estate investing but want to build up your savings first, passive investing is a great way to get started.
Exchange-traded funds (ETFs) allow you to take advantage of the top stocks on major exchanges. Wealthfront makes it convenient to diversify your portfolio with index funds and ETFs by automating your investing.
You sign up, fill out a short questionnaire, and Wealthfront will build you a portfolio based on your financial situation, risk tolerance, and investment goals.
As your investment needs change, Wealthfront automatically rebalances your portfolio accordingly. [automaticallyrebalanceyourportfolioaccordingly
FREC Direct Indexing allows you to get the most out of your portfolio, regardless of what you want to add. FREC is an investment platform that makes direct indexing an accessible investment strategy with low management fees starting at 0.10%.
Direct indexing allows you to purchase the components of an index directly to maximize your tax losses and increase your capital for wealth creation.
It only takes 2 minutes to sign up, so you can start optimizing your portfolio right away.
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This article is for informational purposes only, should not be construed as advice, and is provided without warranty of any kind.