Investing in Real Estate During A Housing Shortage

In a world of fake news there is one fact that is undeniable – the United States is facing a housing shortage. More people are looking to buy a home than sell one. Many larger cities are facing a steady increase in population and homebuilding cannot keep up. So, what should an investor do who is looking to buy a home or invest in multi-family housing? We took this question to real estate expert Ali Safavi of Ali Safavi Real estate.

Q: Mr. Safavi, we see a lot in the news about the current real estate shortage, but we see less about what we should do to fix it.

Ali Safavi: It’s a complicated problem. You can’t make people sell their homes. On top of that, there is a labor shortage in the construction industry that many believe is tied to the current administration’s immigration policy. Whatever your stance is on that issue, there is no denying its effect on the market. That same holds true for multi-family housing. If an investor has a positive cash-flow property, they are hanging on to that for dear life.

Q: Let’s step back for a moment. Why is a housing shortage a big deal?

Ali Safavi: Sure. First, there is the obvious, people who want a home can’t find one. But the bigger problem is cost. Right now it’s a seller’s market in most areas of the United States. This means current homeowners have a lot of power when setting their price. They will most likely have multiple bidders on the property and therefore can keep the price high. This is not only a nuisance for buyers; it means a lot of people, especially millennials, simply can’t afford to buy a home. That’s why we are seeing such an increase in people of all ages decided to rent.

Related: Sales down in western US with low housing inventory

Q: So what is Ali Safavi Real Estate advising people to do?

Ali Safavi: There are a couple areas to consider. First, look for low-cost real estate that is either in need of major upkeep or is located in a less-than-ideal neighborhood.

Related: Ali Safavi Real Estate Examines Shrinking Cities

Q: Wouldn’t that just cause more problems for the investor?

Ali Safavi: There’s no doubt it will take some work on the part of the investor. However, home prices on the low end of the market are rising at twice the pace as those on the high end. This means that if you are willing to make the initial sacrifices, you can get an affordable home that will, potentially, yield high returns over time. Many “rough” neighborhoods of today turn out to be the trendy hot spot in ten years.

Q: What is Ali Safavi Real Estate’s tips on finding these low cost real estate bargains.

Ali Safavi: If buying a home is your number one priority then you should be prepared to move. Affordable real estate is out there, but it may not be within a 20-minute drive to work. If you broaden your horizons, chances are there is a home for you at the right price.

Q: Back to this housing shortage issue. Are there any other options people have?

Ali Safavi: There is a large number of people are who are deciding to build. In many areas there is land available, it just needs a developer. However, as I mentioned before there is a construction shortage and materials remain at a high cost. If you have access to a construction company and a good accountant, building your own home is definitely a viable option.

Q: So if I can’t find a home and the construction companies are all tied up, do I have any options?

Ali Safavi: Yes, keep saving. I know it sounds like a throw away answer, but it is true. Avoid high rent buildings if you can, keep putting money into your savings and wait it out. The shortage won’t solve itself over night, or even within the next five years. Take solace in the fact that you can’t control it. What you can control, hopefully, is your savings. Keep building your nest egg so that when prices start to dip you’re ready with a down payment.