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Beyond Interest Rates: Five Key Factors That Matter More for Real Estate Investors
For months, real estate investors have been fixated on interest rates, eagerly anticipating the Federal Reserve’s next move. With a recent half-point rate cut, some might assume that smoother sailing lies ahead. But in reality, relying on interest rate changes alone is a flawed investment strategy.
Successful investors understand that real estate is a long-term game, and those who wait for the “perfect” market conditions often miss valuable opportunities. While interest rates are important, they are just one piece of the puzzle. The key to success lies in focusing on what investors can control rather than factors dictated by external forces.
Here are five essential factors that should matter more to investors than interest rates.
The Markets We Invest In
Real estate is not a one-size-fits-all industry. National trends may provide a general outlook, but local markets operate independently, each with its own affordability, job growth, rental demand, and long-term prospects.
Investors who succeed do so by choosing their markets wisely. Instead of worrying about national trends, focus on local fundamentals such as:
- Job market stability and growth – Are businesses expanding, and is there a demand for housing?
- Rental demand – Are vacancy rates low, and is the local population growing?
- Affordability and appreciation potential – Is the market undervalued, or are prices sustainable for future growth?
Understanding local trends allows investors to make informed decisions and build sustainable portfolios, regardless of fluctuating interest rates.
The People We Work With
Real estate investing is a team sport. Whether an investor is active or passive, success often depends on the strength and integrity of their team.
For passive investors, choosing experienced property managers, advisors, and operators is critical. A strong property management team can be the difference between consistent cash flow and high vacancies with maintenance nightmares.
For active investors, working with reliable contractors, lenders, and real estate professionals ensures smooth transactions and efficient property operations.
Before partnering with anyone:
- Vet their track record – Look at past performance, client reviews, and references.
- Ask the right questions – Understand their experience, communication style, and problem-solving approach.
- Look for red flags – Avoid partners with poor transparency, hidden fees, or questionable ethics.
Your network directly impacts your success—surround yourself with professionals who share your vision and values.
The Integrity of Our Business
Reputation is everything in real estate. Whether an investor self-manages or hires a property manager, how they conduct business matters.
A landlord’s reputation directly affects their ability to:
- Attract quality tenants – Good tenants seek trustworthy and responsive landlords.
- Maintain long-term relationships – Consistency and fairness lead to lower tenant turnover and stable cash flow.
- Avoid legal issues – Ethical business practices minimize compliance risks and disputes.
A real estate portfolio is not just about numbers—it’s about people, service, and professionalism. Investors who value integrity and long-term relationships will build businesses that stand the test of time.
The Long-Term Vision
Short-term market fluctuations are a distraction from what truly matters: long-term investment goals. Investors who constantly react to short-term changes risk making emotionally driven decisions that derail their success.
Instead of chasing the perfect moment to buy, focus on fundamentals:
- Set clear investment objectives – Are you investing for cash flow, appreciation, tax benefits, or a combination?
- Stick to a strategy – Whether it’s buy-and-hold, BRRRR, or value-add, consistency leads to success.
- Adapt, but don’t overreact – Markets ebb and flow, but smart investors stay disciplined and strategic.
Short-sighted investors act like day traders, chasing market fluctuations. But true wealth is built through patience, discipline, and strategic planning.
The Management of Risk
No investment is risk-free, but smart investors learn to mitigate risk rather than avoid it entirely.
Risk management involves two key components:
- Recognizing and assessing risks – Understanding market risks, property risks, and financial risks before investing.
- Implementing safeguards – Using diversification, cash reserves, and strategic planning to minimize exposure.
Ways to manage risk in real estate include:
- Buying in strong, demand-driven markets to ensure rental stability.
- Avoiding over-leverage by keeping a healthy debt-to-income ratio.
- Having emergency reserves to cover unexpected repairs or vacancies.
- Taking advantage of tax strategies to optimize returns and reduce liabilities.
Investors who prioritize risk management protect their portfolios from downturns while positioning themselves for long-term success.
Final Thoughts: Focus on What You Can Control
Interest rates will rise and fall, and the market will fluctuate—but successful investors don’t wait for the perfect moment. Instead, they focus on the factors they can control:
- Choosing the right markets
- Working with the right people
- Building a reputation for integrity
- Committing to a long-term vision
- Effectively managing risk
By prioritizing these elements, investors can thrive in any market condition, making interest rates just another variable rather than a deciding factor in their success.
Those who adapt, plan strategically, and take decisive action will always be ahead—regardless of where interest rates stand.
In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“
Beyond Interest Rates: Five Key Factors That Matter More for Real Estate Investors
Has the U.S. Housing Market Finally Begun to Thaw After the Pandemic?
It seems like the housing market might be showing signs of life. According to a recent report from Redfin, pending home sales in early October have seen their largest year-over-year rise since 2021, with a 2% increase in the four weeks ending October 6.
This news is likely to be welcomed by real estate investors who have felt the market has offered limited opportunities over the past few years. However, it’s important to take a cautious approach—one promising statistic doesn’t necessarily indicate a broader trend.
Is the Housing Market Truly Recovering?
Let’s explore the different factors at play.
Interest Rate Reductions: A Critical Factor or a Red Herring?
The Redfin report links the surge in pending sales to the Federal Reserve’s much-anticipated rate cut announcement in mid-September. According to Redfin, this announcement prompted buyers to re-enter the market in late September, despite mortgage rates having already been falling for weeks before the cut.
This psychological boost is crucial. Although buyers were aware of the falling rates beforehand, many seemed to be waiting for a formal signal to act. This could be attributed to a lingering fixation on the ultra-low rates of 3% to 4% that buyers enjoyed before 2022.
Any rate cut announcement serves as a nudge for prospective buyers, making them feel that now might be the right time to purchase, even if mortgage rates had been decreasing already. In an unstable mortgage market, such announcements hold significant influence.
However, mortgage rates are just one piece of the puzzle when analyzing housing market performance. As noted by Investopedia, the real estate market is driven by four primary factors: interest rates, demographics, economic conditions, and government policies.
Demographics: Shaping the Market
During the pandemic, demographic shifts had a profound effect on U.S. real estate, with major population movements like the Sunbelt migration fueling booms in cities such as Phoenix and Austin, which later became unaffordable for many.
Age is another key demographic factor, and the millennial generation’s pent-up demand continues to be a driving force behind the rise in home purchases. Despite the challenges of the past few years, millennials who have longed to become homeowners are now entering the market in greater numbers, as more properties become available.
Rising Inventory: A Sign of Stabilization
A key factor contributing to the market’s stabilization is the growth of housing inventory over the last year. The pandemic had a significant impact on the availability of homes, with sellers hesitant to list properties due to COVID-19 restrictions and, later, higher mortgage rates.
Some homeowners, particularly those upgrading to larger homes, found it financially challenging to sell and take on higher mortgages. Others, however, simply chose to wait for a more favorable market.
Although the latest Realtor.com report shows that inventory remains down by 23.2% compared to pre-pandemic levels, we are seeing an upward trend. For instance, new listings have been rising since last year, with a 5.7% year-over-year increase for the four weeks ending October 6.
As of September 2024, some states have even surpassed their pre-pandemic inventory levels, including Tennessee, Texas, and Idaho, with others, like Washington, close behind.
Vulnerabilities in Certain Regions
However, not all regions are showing positive signs. For example, some areas, particularly those affected by extreme weather, have seen inventory spikes not because of market recovery, but due to homeowners trying to offload damaged properties they can’t afford to repair.
For instance, regions like Florida and North Carolina, hit by hurricanes, have experienced increases in home listings, but these may reflect a response to climate-related challenges rather than market health.
Opportunities for Investors
Investors should be discerning when choosing markets, focusing on regions where inventory is growing due to increased home construction rather than climate-related distress. States like Idaho, Utah, North Carolina, and Texas, which are building new homes, offer potential, though caution is needed in areas prone to natural disasters.
The Midwest and Northeast, meanwhile, still face significant challenges in recovering to normal market conditions. These regions have lower rates of new construction, meaning inventory remains scarce, which could present both opportunities and difficulties for investors.
The Bottom Line
The U.S. housing market is showing signs of recovery, but the situation remains complex and varies by region. Interest rates play an essential role in unlocking the market, but investors should also consider other critical factors, such as homebuilding trends, climate risks, and government policies. While the market is heading in the right direction, it’s crucial to examine regional differences carefully before making investment decisions.
In the previous post: “Is Now a Better Time to Invest in Real Estate Debt or Equity?“