A New Year’s resolution to workout more often never hurt anyone. Go ahead and hit the treadmill or max out your reps. But don’t forget to strengthen your financial muscles, too.
Plenty of accredited investors are resolving to do that by pumping up their real estate investment portfolios. And the best ones are tracking some key real estate trends that could significantly increase their gains in 2016 and beyond. If achieving higher returns is on your list of real estate resolutions this year, make sure you keep an eye on the following trends.
1. Rate Hikes Raise Long-Term Financing Questions
When the Federal Reserve increased interest rates by 0.25 percent on Dec. 16, 2015, it ended a nine-year spell of rate freezes. This, says RealtyMogul.com’s Chief Credit Officer Megan Goodfellow, means commercial real estate investors need to consider some important questions.
“Because we anticipated this rate hike back in Q3 2015, the effect has already been baked into the long-term borrowing rate ahead of [the] announcement,” she says. “However, the announcement will definitely affect those that haven’t locked into their long-term borrowing commitment. For those that are still straddling the fence, the news might encourage them to lock into long-term financing.”
2. New Deals Abound
Ely Razin knows CRE finance markets. After all, his company CrediFi aims to become the one-stop shop for real estate loan data. And he’s bullish about the market ahead.
“There’s substantial capital flowing into the market and our data show that lending activity is measurably up,” Razin told Commercial Observer. “Overall, interest rates are still low and the maturity wall means loans need refinancing.”
That’s good news for both owners who need money—and real estate investors looking to spend it, says Razin. “The coming months represent a great opportunity for borrowers to lock in great rates and lenders to secure new deals,” he said in the interview.
3. Tech Gives Real Estate Investors a Competitive Edge
Technology solutions for CRE need to get smarter, faster, writes CEO of CRE software company Hightower Brandon Weber, in Forbes. He says that consumers in every industry demand easy, intuitive software or apps—and CRE is no exception.
“Sensible software—whether to hail a taxi or to manage your leasing business—is becoming the rule, not the exception,” Weber says. “The core CRE software platforms were built decades ago, and it shows. They do not meet the expectations of today’s users, and CRE needs a new generation of technology tools that deliver elegant user experiences and simplicity.”
Legacy systems and outdated implementations present serious problems for established firms. But they also signal opportunity for individuals or smaller investment outfits. Staying on the bleeding-edge of technological advancement can give these smaller parties an edge to find, research and finance deals faster than bigger players.
4. Class B Real Estate Might Be the Play to Watch
You can’t throw a rock without hitting an op-ed about millennials. But there’s a reason for that: this generation’s habits, preferences and buying patterns affect the future of markets and businesses. CRE’s future could be equally dependent on the whims of this young, affluent generation.
In fact, says Charlie Muir at real estate startup Digsy, understanding millennial preferences could give real estate investors a competitive advantage in the market. The biggest opportunity? Class B real estate.
“Whether millennials are getting a check (as well as a non-trivial allotment of stock options) from a tech startup, launching their own brand of organic hydration drink, or simply making lattes while they figure it out, Class B real estate is the best fit hands down,” Muir told us.
The trend applies to both personal and professional space. “Class B office space is good enough for the tech company to be client and new-hire facing, and Class B multifamily is good enough for the individual to be significant-other facing.”
Class B in the U.S. tends to have higher occupancy rates, too, Muir says. Investors take note.
5. Accredited Investors Have Access to More Deal Flow Than Ever
Crowdfunding platforms give real estate investors the ability to pool capital and make investments that wouldn’t be possible on an individual level. These platforms are expected to top out at raising $2.5 billion in 2015 alone. And they’re changing the face of real estate investing.
That’s because real estate crowdfunding platforms use cutting-edge technology to pool capital and give real estate investors access to high-quality deals they can’t access normally. These platforms also provide much-needed financing to more borrowers, too, since they’re able to facilitate quality loans quickly.
In fact, Realty Mogul, our crowdfunding real estate platform, just crossed $20 million in both principal and interest returned to its investors. We’ve also facilitated more than $185 million in equity and debt transactions, including our first full cycle self-storage transaction.
What do you think? Is 2016 the year to pump up your real estate portfolio?