Discover what you need to know about real estate investing in 2025. Whether you're new to real estate or looking to sharpen your skills, this video provides essential knowledge to thrive in the upcoming year. Don't miss out on expert advice that could make 2025 your most profitable year yet!
Economic Outlook for 2025
After four challenging years, everyone's confidence seems to be rising. There is a shared anticipation that current political changes will bolster consumer confidence, potentially leading to an economic rebound. It will take some time to recover fully, but already there is a palpable shift in investor sentiment.
Brian Bush: I think everyone's overall confidence is going up. I think we've been in four years of, well, I'll put it this way. When life gives you lemons, you make lemonade. And that's what we've been doing. I think we've been doing it well, but we just got a fruit basket and everyone's ready for pie and a little bit of fruit punch.
Impact of the Trump Administration on Real Estate in 2025
As we look ahead to the new Trump administration, there's a lot to consider for real estate investors.
Lower Interest Rates
One of the key points to consider is the potential for lower interest rates. The Federal Reserve has already made commitments to lowering interest rates, and it's expected that Trump will put additional pressure to ensure this happens. Lower interest rates could boost buyer confidence and encourage more people to jump back into the marketplace. Currently, buyers have been strong, but inventory has been low, with many purchasing homes at interest rates of 6%, 6.5%, or even 7%. If interest rates come down, we can expect even more buyers to enter the market, and sellers will feel more confident about selling their homes and buying new ones at lower rates.
Deregulation
Elon Musk recently tweeted that America is a country of builders and that soon we will be free to build. This sentiment aligns with the expected deregulation under the Trump administration. As a developer himself, Trump is likely to push for deregulation, which will help builders get back to creating more inventory. Deregulation could be a significant boost for the real estate market, making it easier for developers to build and for investors to find opportunities.
Tax Incentives
During his first administration, Trump introduced various tax incentives, including bonus depreciation, which encouraged investors to cross-segregate their properties and take 100% of the depreciation in the first year. This incentive slowly phased out over the years, but with the new administration, we might see bonus depreciation make a comeback. This would encourage investors to buy and improve properties, making it an excellent time for those looking to get into real estate.
Devin Sheehan: With the Trump administration coming in, there's a lot of excitement in the real estate world. We recently did a video about what real estate would look like under Trump's presidency, covering interest rates, deregulation, and tax incentives. It's a great time to jump in as a real estate investor and take advantage of the market.
Energy Focus
Brian Bush highlighted that Trump's focus on energy, with the "drill baby drill" approach, is expected to stimulate economic activity. This could lead to more people getting involved in the market, especially as interest rates potentially trend down step by step, quarter by quarter. Staying out of foreign conflicts will also play a role in maintaining a stable economic environment.
Timing the Market
Phil: Often, people think they can time the market and stay on the sidelines, expecting things to get worse. However, even with higher interest rates, those who have been on the sidelines in the last couple of years have missed out. There's always opportunity in real estate because people always need a roof over their heads. Values continue to increase, making it a great time to get in the game.
Consistent Opportunities
Brian: We've been making lemonade out of lemons and doing deals consistently. Those sitting on the sidelines are missing out. The old question remains: do you wish you had bought the property 10 years ago? Absolutely, because it just keeps going up in value. With hopefully four years of increasing values ahead, it's time for everyone to get in and participate.
The Role of AI in Real Estate Investing
As we venture into 2025, the landscape of real estate investing is set to be transformed by technological advancements, particularly in artificial intelligence (AI).
Embracing AI in Real Estate
Devin: AI is a tool that will be used to assist in various tasks, from follow-up emails and templates to researching potential investment areas using data. However, it's important to remember that AI is not going to replace the real estate investor. An AI can't predict certain on-site factors like whether there's a graveyard next door or a dump behind the property. The skill set of the investor is still crucial. I see AI as a tool to help with specific elements like emails or researching school systems or data within an area, but not as a replacement for the investor.
Lessons from Early AI Adoption
Phil: Brian, didn't we already see attempts at using AI for house buying operations? How did that work out?
Brian: Yes, they tried it, and it crashed and burned. They learned the hard way that AI can't replace the boots on the ground knowledge of local markets. You need to know the details, like school districts, which AI can't fully grasp. AI should be a servant, not the master. We've seen attempts fail because they lacked the nuances that only a human investor can understand.
The Challenge of AI and Fraud
Phil: AI brings the potential for increased fraud, such as deep fakes. The technology to create realistic deep fakes is already available at low cost. This could lead to more deed theft and fraud situations instigated by AI. It's crucial to stay vigilant and protect yourself from real estate fraud. While AI can assist us, it's essential to remember that real estate is still about physical structures and human interactions. Meeting with sellers in person and building trust remains vital.
AI as an Aid, Not a Replacement
Devin: AI is a tool to help facilitate tasks throughout your day, such as researching areas, creating email templates, and more. However, it won't replace the investor. People still want to do business with people. They want to look you in the eyes and feel confident in signing a contract with you. Building trust and rapport with sellers is what makes our work special. AI can aid us, but it won't take over the essential human element of real estate investing.
Legislative Changes Impacting Real Estate Investing
There are significant legislative changes at the state level that will impact real estate investing. Here’s what these changes mean for investors:
Major Law Change in South Carolina
Brian: The major law change in South Carolina in 2024 has made wholesaling illegal. This approach is something they're quite proud of, and it may act as a template for other states to attempt in their legislative sessions. The goal is to eradicate wholesaling, supported by groups like the National Association of Realtors, who lobby to protect home sellers and commissions.
Legislative Trends Across States
We can expect to see more states attempting similar legislative changes. While some states have already tried, and a few have succeeded, such as Oklahoma, the impact on business practices has varied. These changes have not curtailed the ability of creative investors to operate, but they do pose new challenges and opportunities.
Brian: Has it made it better for creative investors like us? Absolutely. Traditional investors might pull out of the market or shift focus entirely, providing more opportunities for us. It's actually creating fewer opportunities for home sellers with problems, as there are fewer buyers who can solve their issues. We can step in with more techniques and seize these opportunities.
Navigating the New Legal Landscape
Despite the challenges these new laws present, creative real estate investors have found ways to adapt. Being on title provides a significant advantage that cannot be legislated away. This reduces competition and allows those with a diverse set of investment techniques to thrive.
Phil: I prefer fewer laws, but if we can't remove or fight them, we'll adapt. Over the years, creative real estate investors have always found ways to succeed, no matter the changes. Traditional wholesalers who don't get on title might face more challenges, but those with versatile skills will continue to find opportunities.
Impact of the NAR Settlement on Real Estate
The recent settlement by the National Association of Realtors (NAR) related to the listing of the buyer's agent commission in the MLS has been a hot topic in 2024. How has this significant change has impacted real estate professionals and the market?
Adjusting to the New Reality
Devin: What this settlement has really done is force real estate agents to sit down with clients before looking at properties and have a conversation about their value. Experienced agents are now signing buyer agency agreements upfront, which has reduced the instances of buyers sneaking off to purchase homes without their agent. This shift ensures that commissions are still coming from the seller's side, although they are now more of a negotiated item when submitting an offer.
Negotiation and Commission Dynamics
With the new settlement, commissions are becoming a more negotiated item in real estate transactions. Sellers still offer commissions to incentivize buyer agents, even though these are now subject to negotiation during the offer submission process.
Devin: In my experience, this change hasn't significantly affected business. Sellers still offer commissions because they want agents to bring buyers to their homes. It's technically illegal for agents to refuse, but commissions are crucial for motivating agents.
Impact on Market Dynamics
Brian: We've seen some delays due to the transition and how agents and MLS handle the new rules. Agents don't want to be the case study for the first violation, so showings have slowed down. However, sellers are still offering to pay the commission because they need to sell their properties. This change has caused some slowdowns, but it hasn't stopped transactions.
Phil: The settlement has led to slight delays in creating multiple offer situations, but overall, it hasn't had a significant impact. It's more like a technicality that temporarily hurt buyers without much benefit to the marketplace. If buyer agents aren't incentivized with a healthy commission, they'll take their buyers elsewhere.
Adapting Business Models
For real estate professionals, the settlement has reinforced the importance of commissions for buyer agents while highlighting the need for adaptability in business models.
Phil: We've always been fans of flat fee listings to cut out the listing agent, but we've never wanted to cut out the buyer's agent. This change hasn't altered our business model. In fact, our model remains strong, as evidenced by a recent multiple offer situation where the highest bid was significantly above the asking price.
Opportunities for Rental Property Investing in 2025
As we approach 2025, rental property investing continues to be a popular strategy for developing cash flow and building wealth. Here are some highlights of what we think are the best income-producing rental property opportunities for the coming year.
Maximizing Rental Property Potential
Devin: When coaching our students, especially on the rental side, the deal really has to cash flow and make sense. It's about getting into the deal, making the cash, and then scaling up—buying a four-unit, a five-unit, a six-unit, and eventually getting into commercial properties. On the rental side, there's significant potential in Accessory Dwelling Units (ADUs). Due to the lack of inventory, people can buy a property and get approvals to put an ADU on it, creating a secondary source of income. However, it's crucial to ensure the property cash flows from an economic perspective.
The Importance of Economies of Scale
Phil: Economies of scale are essential. Many people think that owning a portfolio of single-family homes is a great wealth-building strategy, but it often isn't. Instead, focus on scaling up to multifamily properties, which offer better cash flow and management efficiency.
Short-Term and Mid-Term Rentals
Devin: Airbnbs and VRBOs are popular, but the model is becoming less dependable due to rapid changes. Towns are implementing stricter regulations, requiring properties to be commercially zoned or for owners to live on-site. Additionally, managing short-term and mid-term rentals requires significant attention to detail, from ensuring keys are available to keeping the property well-maintained. Many owners find it isn't worth the hassle unless they have a solid management system in place.
Phil: Interestingly, while short-term rentals like Airbnbs were once seen as the next big thing, they often lack the foundation for long-term success from a cash flow and scalability perspective. One of our successful graduates built a portfolio of mid-term rentals near an air force base, but ultimately found it too much of a hassle. Now, we're seeing a return to quality, affordable housing with long-term rentals, which offer more stable cash flow and are easier to manage.
The Future of Rental Property Investing
As we move into 2025, the focus will likely shift back to long-term rentals. These properties provide consistent cash flow, are less subject to regulatory changes, and are more scalable in the long run. With experienced management companies available, long-term rentals present a more efficient and sustainable investment opportunity.
House Flipping and Creative Real Estate Investing in 2025
As we look ahead to 2025, there are exciting opportunities for house flipping and creative real estate investing. Here’s where these opportunities are likely to be the best and how investors can make the most of them.
Creative Deals and Subject-To Opportunities
Brian: We anticipated seeing more opportunities for creative deals, particularly those involving subject-to transactions, where investors take over existing mortgages at low interest rates. This trend is expected to continue, with some rates gradually coming down. While the economy is picking up, it will take time for everyone to get back into a strong financial position. During tight times, issues like divorce and job loss still occur, creating immediate needs for solutions. Subject To deals will remain a great opportunity.
Flipping Properties and Generating Cash Flow
For investors who can hold properties and generate cash flow, there may be potential, but the management headaches often make flipping properties more attractive. Flipping can allow investors to work towards multifamily properties and take advantage of low interest rates.
Brian: We've been successful in flipping properties with favorable terms to new buyers, and this will likely continue to be a great opportunity.
Providing Solutions in Any Economy
Devin: Regardless of economic conditions, people face problems like divorce, job loss, and mortgage payment struggles. Our role is to provide solutions to these problems, making our approach resilient in both good and bad economies. Understanding that these situations occur year-round is crucial.
Capitalizing on Low-Interest Mortgages
Phil: One hot trend from 2024 that will likely continue in 2025 is selling properties on a rent-to-own basis or directly to investors who are willing to pay a premium for existing low-interest mortgages. Many investors, including those doing 1031 exchanges, seek these opportunities because they know they can't qualify for new loans. This creates a niche market for properties with low-interest, long-term fixed-rate loans.
Affordable Housing Demand
There is enormous demand for affordable housing, even if the properties need significant work. Investors can capitalize on this by securing such properties and working with buyers willing to invest in improvements. This is especially relevant as material costs have risen and finding quality contractors has become challenging.
Navigating Rehab Challenges
Phil: The cost of rehabbing properties has increased significantly. Investors need strong relationships with contractors and suppliers to get the best rates and avoid unnecessary expenses. Knowing exactly what needs to be done without overspending is crucial. In many cases, selling properties as-is might be a better strategy than extensive rehabs.
Brian: Our approach often involves skipping the rehab and selling properties to buyers willing to put in sweat equity. With limited inventory, more buyers are looking for opportunities to make improvements themselves.
Leveraging Experience and Knowledge
Devin: Our experience and knowledge in fixing up properties—from flooring and vanities to roofing and electrical work—give us an edge. Many new investors struggle with estimating costs accurately and maximizing profitability. Knowing what to fix up and what to leave can make or break a deal.
Phil: Investors need mentors to guide them through finding the right deals, structuring creative investments, and making informed decisions. This knowledge is essential for success in real estate investing.
Advice for Real Estate Investors in 2025
As we gear up for 2025, here are some last-minute pieces of advice for real estate investors to keep in mind. Whether you're a seasoned investor or just starting, these insights can help you make the most of the opportunities ahead.
Get Off the Sidelines
Brian: First and foremost, get off the sidelines. You need to be in the game to participate and capitalize on opportunities. With more creative financing deals and property flipping opportunities, now is the time to take action. Focus on the fundamentals and adapt to your local market's unique challenges and opportunities. With confidence in the new administration and legislative changes, there's a lot to look forward to. Position yourself now to capitalize on these opportunities.
Take Action and Set Goals
Devin: Many people talk about setting goals and getting into real estate 'this year' or 'next year,' but five years later, they've done nothing. The first step is making the decision to dive into real estate and take action. Don't try to time the market—people need to sell in both good and bad markets due to life situations like divorce, job loss, or falling behind on mortgages. Real estate always presents opportunities.
Find a Mentor
Devin: Whether it's us or someone else, find a mentor who's experienced and has a proven track record. A mentor can help shorten your learning curve, reduce mistakes, and accelerate your path to profitability and success. Having someone to guide you through the complexities of real estate investing is invaluable.
The Importance of Mentorship
Phil: We're practicing what we preach here. When asked to coach my 11-year-old soccer team, I sought out a former pro soccer player as my assistant coach. The same principle applies to real estate—find someone who knows more than you do and learn from them. Mentorship can help you navigate the competitive and profitable world of real estate investing. With a mentor, you can leapfrog over many competitors and stay ahead of the game.
A Prosperous 2025 Awaits
As we wrap up, we want to extend our gratitude to Brian and Devin for their insights. We hope our content provides you with valuable wisdom and guidance. Remember, there will be pitfalls along the way, so having a mentor is crucial. Get off the sidelines, get in the game, and make 2025 your best year ever!
If you have questions for us, text FREEDOM to 305-315-8030 or post a comment below.
Every Successful Real Estate Investor Has a Mentor
If you're contemplating diving into real estate, now might be the perfect time to explore a coaching relationship with our team at Freedom Mentor. Let us guide you through the opportunities that lie ahead in 2025: Freedom Mentor Apprentice Program.
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