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Real Estate: A Guide to Investing in 2023

Real estate is thought to be among the best and safest long-term investments anyone can make, whether you decide to own, rent, or flip. As long as you have the necessary money for an investment, real estate can be a tax shelter, provide diversification, build equity, and even generate passive income. But despite all the benefits, taking a leap into the real estate sector can still be a challenging and intimidating decision for many beginners. If you’ve been struggling with this decision as well, here is a guide to investing in real estate in 2023 that might help:

The difference in supply and demand

Real estate is known to be a good hedge against inflation. As the prices of goods and services continue to increase, real estate follows, often more quickly than the rate of inflation itself. This makes real estate a low-risk - high-return investment regardless of the circumstances, but today’s climate might make this decision even more attractive. The real estate sector has significantly grown over the last few years, mostly due to the national housing shortage. The demand for properties is on the rise, but the supply is in deficiency as housing production falls behind. And considering the fact that it might take years to realistically fill this gap, investing in real estate in 2022 seems like a wise decision, as price growth is inevitable in the near future.

Strong historical performance

While 2023 and the upcoming years will likely be great for real estate, it’s worth mentioning its historical performance as well. Real estate investment trusts (REITs) have shown strong performance on stock markets for quite some time now, representing a special stock type that focuses on real estate and real estate securities. REITs also make purchasing shares simple and accessible to investors, making them a good option for investing in real estate. However, it’s worth mentioning that not all REITs are created equal. Even though multifamily housing and industrial real estate are currently booming, office spaces and hotels are providing negative returns. Factoring in these subsectors is advised before investing in REITs.

Investing in real estate internationally

The real estate sector is growing all around the world, and investing in properties internationally can even come with certain advantages you might not be able to find domestically. For instance, real estate in Montenegro is currently on the rise, and for a very good reason. Not only can you easily find deluxe properties for rent in Montenegro that offer high-end waterfront surroundings, exclusive neighborhoods, and access to local marinas, factors that are always in high demand, but their location is quite appealing as well. Montenegro has some of the lowest taxes in Europe, the local currency is the Euro, and the tourist industry has increased rapidly over the last few years, meaning that luxury real estate here is always a smart investment.

Selecting a vacation rental property

A seaside property doesn’t have to be the only choice; all vacation rentals can turn out to be a good investment, whether you choose the stunning French Alps or the Great Smoky Mountains of Tennessee. And if you select the location of a vacation rental wisely, it can provide you with additional advantages such as tax deductions, asset appreciation, networking opportunities, etc. Destinations with a generally strong market tend to be the best option, as they often perform well in good financial markets while providing good seasonal income as well. But keep in mind that these locations might suffer more during recessions than homes situated near major cities, for example.

Purchasing a high-end apartment

Whether you buy an apartment to rent out or for yourself, this could also be a good real estate investment in 2023. Homes located in large cities and great urban areas with plenty of transportation and amenity options nearby are always smart choices. These types of properties tend to hold their value even when other apartments are being built around them, but they do need some additional factors to keep the home attractive in the future as well. High ceilings, large balconies, great views, roof decks, fitness centers, and swimming pools are all aspects that could make an apartment more desirable than other standard properties. Keep in mind that when you buy a good apartment, you should also buy a lifestyle.

Deciding to flip an attractive property

Remodeling an existing property is another option you could go for, which might potentially provide a higher return on investment this year. However, you will likely be limited to real estate that has just the right combination of condition, style, and architecture. Luxury properties are generally more well-maintained than their non-luxury counterparts, meaning the rehabilitation costs will likely be lower as well. The competition among luxury home flippers might be higher, but there tends to be less competition overall in the luxury home market. This is likely due to the fact that there aren’t quite as many people with the necessary knowledge for negotiation, securing financing, and executing a rehabilitation project at a higher level. If you do have these skills, flipping luxury properties might be a good choice for you.

When it comes to real estate, there are evidently plenty of investment opportunities in 2023. Before you make the final decision, make sure to understand what creates lasting value in these types of assets first.

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