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Real Estate Syndication vs Fund [Investment Differences]

Real Estate Syndication vs Fund [Investment Differences]

Real Estate Syndication vs Fund [Investment Differences] 1280 850 m5wyrwy4t888875

How to Achieve Diversification Goals Investing in Real Estate Syndication vs Fund

When it comes to real estate investing, there are two main options: syndication or a fund. Both have their own unique benefits, so it can be tough to decide which is the right choice for you.

Today, we’ll compare and contrast real estate syndication vs fund investing, and help you decide which option is the best strategy for achieving your diversification goals!

Real Estate Syndication

With real estate syndication, you are pooling your money with multiple investors to invest in high quality properties and projects. This can be a great way to achieve diversification and expand your portfolio to include assets you normally wouldn’t be able to afford or manage on your own. Additionally, because you are investing in a pool of properties, you don’t have to worry about picking them– the real estate syndicate manager will do that for you.

Real Estate Fund

A real estate fund is a partnership between an investor and a real estate company. The real estate company uses the funds to purchase, manage, and develop real estate projects. This means you do not have to directly own or manage the properties. Investors will earn a return on their investment from the profits of the real estate company.

This type of investment strategy can be used to finance a variety of different types of real estate projects. For example, real estate funds can be used to purchase office buildings, retail shopping centers, industrial warehouses, or residential apartments. Real estate funds can also be used to finance the development of new real estate projects such as hotels or golf courses.

Which is Better for Achieving Your Diversification Goals?

The answer depends on your specific goals and circumstances. If you are looking for a hands-off investment where you don’t have to worry about picking the wrong property, then a real estate syndicate is the better option. However, if you are looking for more diversity and want to invest in multiple properties, then a real estate fund is the better option.

No matter which option you choose, make sure you do your research and talk to a financial advisor to ensure you are making the best decision for your unique circumstances.

Finding Opportunity. Delivering Results.

MRA Capital Partners offers real estate investment strategies focused on maximizing the internal rate of return through favorable deal structures and the pursuit of non-correlated investment returns. Learn more about our investment strategies by visiting us online. Also, sign up to join MRA Capital Partners’ preferred investor network to learn more about our upcoming unique investment opportunities.

4 Tax Benefits of Real Estate Investing

4 Tax Benefits of Real Estate Investing

4 Tax Benefits of Real Estate Investing 1280 850 m5wyrwy4t888875

4 Tax Benefits of Real Estate Investing

Real estate investing is a smart move to diversify your portfolio, but did you know it also provides tax benefits? Whether you are experienced in real estate investing or just getting started, it’s hard to beat the tax advantages real estate can provide.

Today, we’re going to be exploring some essential strategies you can utilize. But remember, it’s always important to consult with your own personal tax advisor before implementing them.

Cost Segregation Study

Over time, assets like real estate properties lose value. As a result, investors can use a cost segregation study to their advantage during tax season to legally maximize their after-tax returns. According to the IRS, the useful life of residential properties is 27.5 years, meaning you’re able to write-off 1/27th of the value of the property each year. If you’re in the commercial real estate industry, commercial properties are 39 years, which allows you to write-off 1/39th of the property’s value each year. This rule lets investors decrease their taxable income and reduce their liability up until their properties have fully depreciated.

Short-Term & Long-Term Capital Gains

When you sell a real estate property for profit, you may be subject to a capital gains tax. This is a tax on the difference between what you paid for the asset versus what you sold it for. A capital gains tax can come in two forms: short-term and long-term.

Short-term capital gains taxes are levied on profits from the sale of assets that have been held for one year or less. If you sell a real estate property for profit and it is considered a short-term capital gain, you will be taxed at your ordinary-income tax rate. For most people, this is a higher rate than the long-term capital gains tax rate.

Long-term capital gains taxes are levied on profits from the sale of assets that have been held for more than one year. If you sell a real estate property for profit and it is considered a long-term capital gain, you will be taxed at a lower rate than your ordinary income tax rate.

Deductible Expenses

When you invest in real estate, you’re able to take advantage of tax deductions. This means that the expenses that are incurred from your operations, management, and maintenance of the property can be subtracted from the adjusted gross income on your tax form.

For rental properties, such tax deductions may include property taxes, maintenance fees, management fees, and mortgage interest expenses. You also have the opportunity to take advantage of further business-related tax deductions if you invest in real estate with an LLC or limited partnership. These include:

  • Travel expenses
  • Mileage expenses
  • Advertising fees
  • Office space
  • Business meals
  • Business equipment

Pass-Through Deduction

If you own a real estate property that collects rent, you can take advantage of the pass-through deduction tax benefit. This tax benefit lets you deduct up to 20% of the qualified business income on your taxes since rental income is considered a QBC. It is important to note that in 2025, this provision is set to expire under the Tax Cut and Jobs Act of 2017.

Finding Opportunity. Delivering Results.

MRA Capital Partners offers real estate investment strategies focused on maximizing the internal rate of return through favorable deal structures and the pursuit of non-correlated investment returns. Learn more about our investment strategies by visiting us online. Also, sign up to join MRA Capital Partners’ preferred investor network to learn more about our upcoming unique investment opportunities.

Federal Reserve Rate Hikes & the Multifamily Industry

Federal Reserve Rate Hikes & the Multifamily Industry

Federal Reserve Rate Hikes & the Multifamily Industry 1280 850 m5wyrwy4t888875

How the Federal Reserve Rate Hikes Impact the Multifamily Industry

With inflation at a 40-year high of 7.9%, the Federal Reserve’s recent decision to raise interest rates is bound to have an impact on the multifamily industry. According to Federal Reserve Chairman Jerome Powell, the Central Bank is prepared to aggressively raise interest rates by half-percentage points over a series of steps to curb the economy and reduce inflation. If necessary, they’re willing to tighten measures into a more restrictive stance to restore price stability that has been impacted by supply-chain bottlenecks caused by the aftereffects of the pandemic and the recent war in Ukraine.

For now, the Federal Reserve has hiked the interest rate from almost zero to a range between 0.25% to 0.5%. This ended the period of no rate hikes since 2018. Officials also added additional rate hike increases that will raise interest rates to almost 2% by the end of 2022. By 2023, these rates are forecasted to be around 2.8%.

So, what do these Federal Reserve rate hikes mean for the multifamily real estate industry? Read on to find out.

Impact on Commercial Properties

With interest rates rising, commercial properties will likely be affected by the sizes of loans. We’ll likely see loan sizes shrinking due to higher debt service payments as well as a reduction in property cash flow.

However, since rent growth is currently strong throughout many regions in the United States, this could potentially help reduce the impact borrowers face on debt service payments. Also, with higher interest rates, renters may be discouraged from becoming homebuyers and taking out mortgages on properties, resulting in them continuing to remain renters.

REIT Performance and Interest Rates

REITs have historically been shown to perform well during periods of rising interest rates. In fact, 84% of the months between Q1 1993 to Q2 2021 showed positive REIT returns when 10-year Treasury yields rose and often outperformed the S&P 500.

For 2022, real estate investors can likely expect to see their earnings continue to grow as the Federal Reserve continues to raise interest rates. In addition, since REITs are a fixed-rate debt, interest expenses will likely not rise too much.

Expansion of Cap Rates

As the Federal Reserve implements rate hikes, real estate investors need to be aware of the potential implications it has on capitalization rates (“cap rates”) and investment capital. Real estate investors should know that there is potential for cap rates to expand on multifamily real estate properties such as residential rental units due to the cost of capital increases.

It is worth noting, rising interest rates could make fixed-income securities look like a more attractive investment for portfolios focused on high-yield and fixed-income since there could be a reduction of capital flowing into real estate investments. However, institutional capital will most likely continue flowing into this sector since there is such high demand in the US market for rental units. If this happens, we’ll see a curb on capital being reallocated into fixed-income securities like bonds. Instead, capital will be invested into rental assets like build-to-rent and single family residences that are owned and operated as rental properties.

How to Navigate the Effects as a Real Estate Investor

As a real estate investor, it is vital to be aware of these potential implications and factor them into your decision-making process. Doing so will help you make more educated and informed investment choices and potentially avoid costly mistakes.

Finding Opportunity. Delivering Results.

MRA Capital Partners offers real estate investment strategies focused on maximizing the internal rate of return through favorable deal structures and the pursuit of non-correlated investment returns. Learn more about our investment strategies by visiting us online. Also, sign up to join MRA Capital Partners’ preferred investor network to learn more about our upcoming unique investment opportunities.

Multifamily Properties: How to Add Value

Multifamily Properties: How to Add Value

Multifamily Properties: How to Add Value 1280 850 m5wyrwy4t888875

8 Upgrades that Add Value to Multifamily Properties

Multifamily properties with outdated appliances and features don’t appeal to tenants as much as modern and new ones. To make a decent profit when selling or renting multifamily properties, you must increase their value with capital improvements. Here are some of the most beneficial multifamily investments you can make.

1. Install Central Air & Heat

Installing central air and heat is a great way to increase your property’s value. It makes a living space more comfortable to inhabit and creates the potential for higher rents.

2. Upgrade Kitchens

Outdated kitchens can impact the selling and rental price of a multifamily property. That’s why property owners need to upgrade each unit’s kitchen with granite or stone countertops, stainless steel appliances, and new floors.

3. Repair Decks & Porches

Broken-down decks and porches can decrease the value of your multifamily property. Property owners can fix this issue by repairing wood decking and porches to be functional, safe, and attractive.

4. Increase Insulation

When upgrading multifamily properties, be sure to examine the insulation. Low insulation levels in a unit can lead to airflow seeping in or out of walls, floors, and ceilings. To prevent this, add in new insulation panels that’ll provide adequate resistance from unwanted temperature fluctuations. As a result, you’ll reduce energy consumption and increase the value of your property.

5. Improve Laundry Rooms

Providing laundry rooms in multifamily properties is a big perk for tenants. To ensure your laundry rooms are updated, look towards installing new washers and dryers and folding tables. This will increase the property’s value, and most importantly, make tenants happy.

6. Add Ceiling Fans

If you’re unable to add an AC unit to your multifamily property, look towards installing ceiling fans in living rooms and bedrooms. This will help distribute air throughout the space, reduce room temperatures, and lower utility costs.

7. Replace Old Windows

If your multifamily property has old, single-pane windows, consider replacing them with double-pane windows. They offer a thick insulated barrier that reduces airflow and energy consumption.

8. Fix Roofs

When fixing a multifamily property, be sure not to neglect roof maintenance since it’s one of the biggest factors when determining property value. Look towards replacing shingles or the roof entirely to prevent any water damage or rot from forming.

Finding Opportunity. Delivering Results.

MRA Capital Partners offers real estate investment strategies focused on maximizing the internal rate of return through favorable deal structures and the pursuit of non-correlated investment returns. Learn more about our investment strategies by visiting us online. Also, sign up to join MRA Capital Partners’ preferred investor network to learn more about our upcoming unique investment opportunities.

2021 Multifamily Industry Sets New Records

2021 Multifamily Industry Sets New Records

2021 Multifamily Industry Sets New Records 1280 850 m5wyrwy4t888875

4 Multifamily Industry Trends to Watch in 2022

The multifamily industry had a record-breaking year in 2021. According to Multifamily Executive, investment volume rose to $335.3 billion—almost doubling 2019’s $193.1 billion—and annual absorption hit 617,500 units. This is thanks to the continued strong demand for rental units, as more and more people are choosing to rent instead of buy since the pandemic.

As we look at how the multifamily market will perform in 2022, there are no signs of it slowing down. From job creation and economic growth to household formation, the future of the multifamily industry is strong. Here are four industry trends to keep a close eye on this year.

1. Rise of New Households

Over the past year, there has been a strong demand for multifamily units alluding to an increase in household formation. This is likely due to the pandemic in 2020 putting a pause on households forming.

During this time, we saw many young adults (ages 18 to 29) moving back in or staying at home with their parents, which was higher than any previous measurement taken, including the end of the Great Depression in 1940. The economic downturn took a massive hit on this segment, with 18% citing that their move back home was thanks to job loss or financial difficulties.

Since then, markets across the country have begun to reopen, causing an economic boom. As a result, we’re seeing this segment of the population demanding housing.

According to CBRE, it’s forecasted that the multifamily occupancy levels are projected to remain higher than 95%, and net effective rents are projected to be around 7% growth in the following year.

2. Return to the Office

With the pandemic slowly dissipating, offices across the United States have begun welcoming back their employees in-person as well as hiring new ones. This has sprung a trend of “return to the office” in major cities and metro areas, thus increasing the demand for apartments to rent.

3. New Development Projects

2022 so far is showing that there is high consumer demand for multifamily properties. This is causing developers to meet this demand by creating built-to-rent spaces with strong investor backing.

For those unfamiliar with built-to-rent spaces, it simply means designing purpose-built housing that will be listed as ‘for rent’ instead of ‘for sale.’ This can include properties like horizontal apartments, single-family rentals, or detached single-family homes as rental assets in a more extensive holding portfolio.

Growing areas that are seeing new development projects coming to fruition are urban cities. According to CRBE, it’s projected that there will be an 8% growth in urban effective rents due to higher vaccination rates, return to office policies coming back, college campuses reopening, the need for public transportation, and fewer restrictions on city amenities.

4. Effective Rent Growth

During 2022’s winter months, apartment occupancy has increased, especially in Sun Belt and Mountain region markets. These markets are dominating for new lease effective rent growth. Cities that topped the list, according to RealPage, include:

  • West Palm Beach, Florida
  • Tampa, Florida
  • Phoenix, Arizona
  • Orlando, Florida
  • Fort Lauderdale, Florida
  • Las Vegas, Nevada
  • Jacksonville, Florida
  • Raleigh-Durham, North Carolina

Finding Opportunity. Delivering Results.

MRA Capital Partners offers real estate investment strategies focused on maximizing the internal rate of return through favorable deal structures and the pursuit of non-correlated investment returns. Learn more about our investment strategies by visiting us online. Also, sign up to join MRA Capital Partners’ preferred investor network to learn more about our upcoming unique investment opportunities.

What is Real Estate Syndication? [5 FAQs]

What is Real Estate Syndication? [5 FAQs]

What is Real Estate Syndication? [5 FAQs] 1280 850 m5wyrwy4t888875

What is Real Estate Syndication? MRA Capital Partners Breaks it Down

Are you interested in passive real estate investing? Whether you’re just beginning or are an accredited investor, you’ve likely come across a few real estate syndications in your search to create a diversified portfolio that minimizes risk and maximizes return potential.

Now you may be asking yourself, “What is a real estate syndication?” MRA Capital Partners is here to explain everything you need to know about how it works and how to participate.

Defining Real Estate Syndication

Real estate syndication is a funding relationship between a group of investors who pool their money together to purchase higher quality properties and projects. This provides them access to larger investments that they normally wouldn’t have been able to manage or afford on their own.

Who Can Participate

To be eligible to participate in a real estate syndication, investors must be either accredited or sophisticated.

An accredited investor is a natural person that meets the net worth and income guidelines set forth by the Securities and Exchange Commission (SEC), which are:

  • Earned an income of $200,000 (or $300,000 combined with a spouse) annually in each of the two previous years. They expect the same income for the current year.
  • Has a current net worth of more than $1 million (alone or with a spouse).
  • Holds a 7, 65, or 82 license and are in good standing.

A sophisticated investor is an individual who has the knowledge, net worth, sufficient capital, and experience to participate in certain investment opportunities.

How it Works

To organize a real estate syndication, they’re set up as partnerships where the general partner—also referred to as sponsor or organizer—is responsible for sourcing, underwriting, and managing the investment property. They’re also in charge of executing the overall development or value add plan and would earn fees and/or a share of the profits. A general partner will typically invest a portion of their own money into the deal which is around 10% or more of the total equity. The remaining cash is raised by passive investors who are known as the limited partners.

What’s the Role of the Limited Partner?

For investors seeking to passively invest in real estate, they’ll become a limited partner. This means they’re not involved in the day-to-day management of the real estate property nor are they liable for any of the debt obligations or risks associated with it.

Limited partner investors experience all the benefits of owning the property and will receive ownership shares and cash flow distributions from income, expenses, gains, losses, and tax deductions.

Common Real Estate Syndication Investments

When investing in commercial real estate syndications, it’s important to understand the different property types. These include:

  • Multifamily
  • Office
  • Senior Housing Facilities
  • Self-Storage
  • Retail
  • Industrial
  • Hotel

Finding Opportunity. Delivering Results.

If you’re interested in learning more about passive investments and high quality commercial real estate, consider joining MRA Capital Partners’ preferred investor network. Sign up today and be one of the first to find out about our next offering.

Apartment Amenities that Increase Value & Save Money

Apartment Amenities that Increase Value & Save Money

Apartment Amenities that Increase Value & Save Money 1280 850 m5wyrwy4t888875

6 Budget-Friendly Apartment Amenities that Add Value to Your Rental Property

Have you recently invested in an apartment complex that’s undergoing construction? If so, it’s key to look towards ways to maximize your investment. One easy way to do so is to upgrade the building’s functionality with brand-new apartment amenities. Doing so will help raise its property values and create attractable multifamily housing for renters.

Let’s look at six budget-friendly upgrades that property owners should consider adding to their apartment investments.

1. Parking Spaces

When tenants are looking for an apartment, one requirement at the top of their list is a safe place to park their car. Property owners can offer off-street parking with assigned spots or a garage for tenants and their guests to park their vehicles.

2. In-Unit Washer & Dryer

A simple way to add value to apartments is to install in-unit washer and dryer appliances. This allows tenants to conveniently wash their clothes, bedding, and other items without having to worry about walking or driving to a laundromat. As a result, property owners will find that in-unit laundry appliances will positively influence property values and allow you to charge more in rent.

3. Pet-Friendly Areas

Many renters look for apartments that are safe and friendly for their pet companions. As a property owner, it’s up to you to decide whether you wish to have animals on property. If you choose to offer pet-friendly units, think of adding a spacious dog park on the premises. This will allow you to leverage your apartment complex as a marketing tool and gain an increased tenant retention.

4. Kitchen Island

If the space affords, installing a kitchen island is an excellent addition to an apartment. They offer tenants more room to prepare and cook food dishes as well as store kitchen items. It’s best to look for durable countertops like laminate, solid surface, and concrete.

5. Central Air & Heat

An essential amenity every renter looks for when they’re apartment hunting is central air and heat. It’s recommended property owners offer this feature so tenants can live in a comfortable climate-controlled space.

6. Outdoor Space

Adding outdoor space to an apartment complex is a great way to attract tenants and increase property values. Property owners can look towards building a shared green space, private balconies, or a spacious rooftop deck. Within these outdoor spaces, you can add fun amenities like a pool, garden, tennis court, or seating area.

Finding Opportunity. Delivering Results.

MRA Capital Partners offers real estate investment strategies focused on maximizing the internal rate of return through favorable deal structures and the pursuit of non-correlated investment returns. Learn more about our investment strategies by visiting us online. Also, sign up to join MRA Capital Partners’ preferred investor network to learn more about our upcoming unique investment opportunities.

Hot Real Estate Markets to Invest in for 2022

Hot Real Estate Markets to Invest in for 2022

Hot Real Estate Markets to Invest in for 2022 1280 850 m5wyrwy4t888875

5 Real Estate Markets Where Economic Growth is Heating Up

Now that 2022 is officially here, it’s time to look towards strengthening your investment portfolio. To accomplish this, it’s essential to examine the growing real estate markets throughout the United States to determine which ones are right for you.

But, before you begin, you must also take into consideration that the real estate market in 2022 is expected to continue being a sellers’ market with buyer competition remaining strong. This is because many individuals are still working remotely, which gives them the freedom to move across the country. It also means other individuals are choosing to escape high-taxed states and move to ones where economies are robust with job growth and affordable housing prices.

If you’re ready to find out what real estate markets are heating up for 2022, here are five top markets to keep a close eye on.

Tampa/St. Petersburg, FL

In 2022, Tampa and St. Petersburg, FL, are projected to be one of the strongest real estate markets in the United States. According to realtor.com, their markets are positioned for tremendous growth with a combined anticipated sales and price growth of 16.4%.

Due to their diverse economic bases, strong market growth, and inviting atmosphere, both areas are great destination spots for businesses and individuals to relocate. They’re also ranked among the top destinations in the country for development and redevelopment projects.

Austin, TX

Austin, TX, is the live music capital of the world and has a desirable real estate market that’s continuing to grow. Many technology companies and individuals seeking affordable housing prices are relocating here. As a result, this is increasing the demand for development and redevelopment opportunities. If you’re an investor, now is the time to take advantage of this growing market.

Clearwater, FL

Located on Florida’s east coast, Clearwater is an excellent real estate market for investors. The economy is strong with growth and tourism. This results in rental properties remaining in high demand. Investors who seek out rental properties will experience an immediate return on investment. And just like Tampa/St. Petersburg, realtor.com projects the housing market in 2022 will experience a combined sales and price growth of 16.4%.

Spokane, WA

With the housing demand remaining robust in Spokane, WA, it’s anticipated to be a top real estate market for 2022. Here, buyers and investors will find the best of the pacific northwest in a vibrant urban city. With an accessible downtown, a growing job market, and a plethora of outdoor activities, Spokane will be a great city for investors to seek out real estate investment opportunities.

Salt Lake City, UT

Set amongst the Wasatch Mountains, Salt Lake City, UT, stands out as a thriving real estate market for 2022. With a growing business sector and a plethora of fun activities to take part in, buyers across the United States are eager to move here. According to realtor.com, the metropolitan city is anticipated to experience a combined sales and price growth of 23.7%.

Finding Opportunity. Delivering Results.

MRA Capital Partners offers real estate investment strategies focused on maximizing the internal rate of return through favorable deal structures and the pursuit of non-correlated investment returns. Learn more about our investment strategies by visiting us online. Also, sign up to join MRA Capital Partners’ preferred investor network to learn more about our upcoming unique investment opportunities.

Market Recession Indicators: A Look into the Future

Market Recession Indicators: A Look into the Future

Market Recession Indicators: A Look into the Future 1280 850 m5wyrwy4t888875

5 Market Recession Indicators to Watch Out For & Know

As a real estate investor, nothing is more essential than following the market to see if there are any indications of a coming recession. While predicting the exact date of a recession is never clear-cut, it’s vital to look for market recession indicators showing any signs of market changes.

To help you keep a watchful eye out for an impending recession, here are five indicators to follow.

Confidence Indexes

The amount of confidence people have in the US economy is highly important. That’s why it’s essential to follow confidence indexes to determine the economy’s overall health. These indexes will show how confident people feel about their income, spending, and savings. It also provides critical insight into confidence surrounding trade tensions that may weaken investments and manufacturing.

As an investor, it’s vital not to get too caught up in month-to-month changes since consumer spending and confidence can quickly flip. Instead, it’s best to focus on negative consumer confidence over a prolonged period. This could indicate a recession is on the horizon, and you should hold off investing in new real estate opportunities and/or adjust your investment strategy.

Yield Curve

One of the traditional market recession indicators is the yield curve. This yield corresponds with all US Treasury maturities ranging from 1-month bills to 30-year bonds.

When the market is normal, the yield curve will have an upward slope. This is because investors believe they will be rewarded for taking on riskier long-term maturities. However, when the yield curve inverts, this indicates that short-term maturities are higher than long-term ones. While different factors can contribute to this inversion, it often concludes that the economy is weakening, and investors should closely monitor the change.

Employment

If you start to notice many people are losing their jobs and cannot find work, it could be a sign that the US economy is headed for a recession. This is because high unemployment rates across the country are indicative that the economy is performing poorly. As a result, you’ll likely see more businesses letting go of temporary workers first than making significant cuts to their employment list to save their bottom line. If you’re invested in real estate development, workers being let go and projects being put on hold may potentially impact your projects.

Supply Issues

When the supply chain is impacted due to shortages and constraints, it can potentially hurt the US economy. This will result in manufacturing lacking the necessary supplies and parts to meet strong consumer demands and may result in them laying off workers, leading to a constraint on production growth. Also, manufacturers may have to close plants or their company to save costs.

This scenario was all too prevalent in the construction industry during the COVID-19 pandemic. Construction companies struggled to find wood paneling, ceiling joists, pipes, and more to complete their projects. As a result, this left them forced to seek alternative options and push their projects out by 3-months to a year in order to have all the necessary supplies to meet the new housing demand.

Foreclosure Activity

If you notice lenders filing more default notices and an increase in mortgage foreclosures entering the market, this could be a key market recession indicator. This scenario was all too true during the Great Recession where millions of mortgages entered the foreclosure process. While we are nowhere near those numbers today, monitoring any changes in foreclosure activity is vital. This will help you determine whether you should invest in new developments and redevelopments or hold off until the market corrects itself.

Finding Opportunity. Delivering Results.

MRA Capital Partners offers real estate investment strategies focused on maximizing the internal rate of return through favorable deal structures and the pursuit of non-correlated investment returns. Learn more about our investment strategies by visiting us online. Also, sign up to join MRA Capital Partners’ preferred investor network to learn more about our upcoming unique investment opportunities.

How Does Interest Rate Affect Real Estate?

How Does Interest Rate Affect Real Estate?

How Does Interest Rate Affect Real Estate? 1280 850 m5wyrwy4t888875

How Does Interest Rate Affect Real Estate? Common Concerns Answered

Many real estate investors are curious about how interest rates can affect real estate for 2022. As the economy heals from the pandemic, rates will begin to move higher as the economy bounces back to pre-pandemic conditions. This leaves investors to question whether the commercial or residential real estate market will be impacted by these rising rates.

While this may seem concerning, real estate investors should feel at ease knowing the real estate market is forecasted to remain favorable for them in the new year. But it’s important to always keep an eye out on how fluctuating interest rates can impact your investment properties.

Let’s look at the biggest interest rate factors that can affect real estate.

Cost of Capital

When interest rates rise or fall, the cost of mortgage capital on a real estate property can be profoundly impacted. High interest rates can cause mortgage debt to be more expansive and impact capitalization rates (cap rates). For investors wondering what a cap rate is, it’s simply a metric used to forecast the ROI on a real estate property. Meaning as cap rates rise, real estate valuations fall and when cap rates are decreasing, real estate valuations are increasing.

Economic Growth

Economic growth can have a profound impact on interest rates and how they affect real estate. This year, we saw the economy rebounding from the pandemic with more businesses generating activity nationwide and homebuyers flooding the residential real estate market trying to purchase homes with low interest rates. This resulted in the demand for houses and apartments being higher than the supply available causing bidding wars to breakout.

The extensive growth over the past year will most likely fall over into 2022 pushing inflation and interest rates to rise. For those in the commercial real estate sector, this can be a positive investment opportunity for you to monitor. When the demand for commercial space is rising, there will be higher occupancy rates, earnings, and property valuations. Earnings off these properties will offset any pull from increasing interest rates.

Now, if the Federal Reserve decides to lower rising interest rates by influencing the money supply, more individuals will be able to borrow money and spend it. This will increase the demand for properties and drive-up prices to be more competitive. However, this scenario is unlikely since the Fed is expecting the current high inflation market to create positive price growth over a longer period. Investors will just have to wait and hope interest rates don’t rise quicker than expected.

Finding Opportunity. Delivering Results.

MRA Capital Partners offers real estate investment strategies focused on maximizing the internal rate of return through favorable deal structures and the pursuit of non-correlated investment returns. Learn more about our investment strategies by visiting us online. Also, sign up to join MRA Capital Partners’ preferred investor network to learn more about our upcoming unique investment opportunities.

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