2023 has the potential to be an excellent year for real estate investors. There are concerns about the current state of the housing market. Current and future investors want to know how inflation and high-interest rates affect short-term and long-term property values. None of these factors should scare you away from hitting the market for Studio City condos for sale. Use the advice below to position yourself for success when shopping for Studio City real estate in 2023.
Understand the current state of the market
Many communities nationwide found themselves in a slight recession at the beginning of 2023, which comes as a surprise given the robust state of the market in recent years. Interest rates dropped drastically at the onset of the COVID-19 pandemic in 2020, and many buyers jumped at the chance to secure properties with a low monthly payment. The heavy increase in demand allowed sellers to charge higher prices for their homes while still commanding multiple offers well above the asking price.
Times have changed, and buyer demand has waned because interest rates currently sit close to seven percent. The fact that inflation is as high as it’s been in nearly 40 years doesn’t make things easier for individuals struggling to keep up with a rising cost of living.
Average sales prices of Studio City condos for sale have come down from where they were one year ago. Homes usually spend around one month on the market and sell for a price close to the listing. Some homes will receive multiple offers and sell for an amount higher than the original asking price. Depending on the demand for the property you’re looking at, you may need to be prepared to act quickly and make a competitive offer if you find a home you like.
Get your finances in order
Talking to a lender is essential unless you plan to pay for a home in cash. Your lender will help you understand what type and amount of loan you can qualify for. Remember that different lenders will offer different interest rates, so it’s a good idea to shop around and talk with more than one bank or group to see who can provide you with the best deal.
Regardless of what type of loan you use to purchase a home, you’ll need to have some cash on hand to put down at closing. Most homes require a down payment of somewhere between three and five percent. You can save yourself money on accrued interest if you can put down more cash upfront. You may also find sellers more willing to accept a lower price if you include more cash in the deal. Closing costs are an added expense and usually total between two and six percent of the home's total cost.
Think about how you’ll maximize your return
Consider how you will maximize your return when you own the home. Most investors rent out their properties on a short-term or long-term basis. There are pros and cons to either option. Long-term rentals provide a consistent form of income that is usually enough to pay the mortgage on the property. Still, you’re unlikely to make significant profits immediately with this arrangement. Listing your property as a short-term rental on a platform such as Airbnb often allows investors to make more when the home is occupied, but there’s less certainty because you don’t know how often your home will be vacant.
Consider the tax implications
Owners of multiple homes have to weigh the unique tax ramifications. You will be limited in terms of what expenses you can write off on your taxes. Typically you cannot claim more than $10,000 worth of property taxes (or $5,000 if you’re married but filing separately). You can only write off the mortgage interest on up to $750,000 worth of debt, which represents a combined amount between all your properties.
Other factors come into play depending on how frequently you rent your home. Homeowners who rent their homes for less than fourteen nights during the calendar year don’t have to claim any income. If you’re considering buying an investment property, you probably have plans to have tenants occupying the home for more than two weeks. If so, you must report all rental income on your tax return. You will be allowed to write off any salary you pay for a communications assistant or a property manager, along with utility costs and home repairs on a prorated basis.
Figure out who can help you with your purchase
*Header photo courtesy of Shutterstock