From stocks to bonds and even Bitcoin, there are endless options of where to put our money. But there’s one investment that’s proven: real estate. So, why are more Arkansans not taking advantage?
Near historic home prices have many wondering whether the financial barriers are too high. But as someone who successfully buys, sells and manages properties, I can say now is as good a time as any—if not better—to jump into the market.
Forbes says, “when done appropriately,” real estate investing is the “highest-earning asset class a portfolio can have.” It’s generally protected from significant price dips or inflation and offers tax benefits and deductions, such as depreciation or operating expenses. Perhaps one of the most compelling reasons is the passive income it provides.
Yet misconceived notions about real estate investing remain—even among realtors. Prospective buyers and agents are concerned about not having enough capital for the initial purchases. Or they are hesitant about whether setting aside funds for down payments will pay off in the long term. As a result, many Arkansans hold back, leaving money on the table.
Take a real estate agent as an example. Often, they think their commissions outweigh their potential investment returns, but that math doesn’t always add up. According to Redfin, the average real estate commission is 5-6% of the home’s sale price, split between the buyer’s and the seller’s agents. But that’s just one time. On the other hand, investment properties generally offer a return of eight percent or at least 1% of the home’s purchase price each month. If owners put additional money into the houses, their potential cash flow rises significantly.
It seems daunting to get started, but it’s simply finding the right properties. Independently, with professional assistance or as real estate agents, prospective investors should focus on specific neighborhoods and subdivisions, also known as “micro-markets.” Buyers should consider school districts, amenities and developments that may impact rent and resale values. With every purchase, investors should find the sweet spot. They don’t want to spend too much or too little on improvements. Experts can lend a hand in helping them avoid hidden costs and lost profits.
Home prices and interest rates are increasing. But that doesn’t mean there aren’t still opportunities to purchase, rehab and rent properties for solid profit margins. Whether buyer or agent, I believe it’s time for Arkansans to close the deal on real estate investing.
Editor’s note: Amber Wood is a partner, agent and VP for sales with Mid South Realty, a Little Rock-based real estate brokerage specializing in investment properties. The opinions expressed are those of the author.