How is the war in Ukraine affecting real estate?

I’m going to try to explain this as simply as I can without getting into the politics of it.

Right now,  what we’re dealing with is a supply and demand issue. We don’t have enough supply to keep up with demand. We’ve got more buyers than sellers and that’s for a multitude of reasons.

Some of it has to do with the fact that getting materials and supplies is tough right now. Some of it has to do with the fact that COVID is taking out crews and people everywhere and slowing down labor progress. Another big factor affecting the supply chain is that the cost of just about everything is increasing. Between inflation and the war in Ukraine, as well as the increase in gas prices, it’s getting more expensive to obtain the supplies and materials needed to actually build properties. Everything is also taking longer for the reasons listed above. Because of all of this, we have a supply and demand issue.

Market Reality

We are seeing 25% fewer listings on the market right now compared to this time last year. We’ve also seen a 16% increase in sales prices from last year.

Rates are likely going to stay low while things are uncertain with everything in Ukraine. Typically, investors are drawn to more solid investments during times of uncertainty. Many want to invest in real estate and mortgages rather than stocks and bonds, which tend to be more volatile when things are crazy overseas and in the world. I predict that mortgage rates will continue to climb, but the war in Ukraine will slow the increase down.

What does this really mean for you?

I’m a firm believer that there are still deals to be had. There are always deals! You can always find motivated sellers, no matter what is going on, no matter what phase of the market cycle that we’re in.

This is what I recommend:

1. Do not sideline yourself, stay in the game, keep looking, keep making offers, keep running numbers.

2. Don’t overpay for a property as an investment. Don’t pay more than it appraises for unless you have real confidence in the appreciation or you have a significant cash flow that you know for sure you can capture.

3. If you are looking to buy a personal residence, I’d probably hold off. If you’re looking to sell a personal residence, I would do it now because it’s a seller’s market. You’ll have a really powerful listing if you list it now.

If you plan to do a 1031 exchange, which allows you to defer capital gains, understand the implications. You have to buy within 180 days of the closing of the sale, so you need to be sure you have a property you can reasonably replace it with.

You might be super excited about the money that you can make off of the sale of a property but you will pay those capital gains if you cannot find a replacement property for it and close within a certain amount of time.

Don’t back yourself into a corner and force yourself to buy something that you know will have a worse return than what you had before. Or maybe, you won’t be able to find anything at all and then you end up having to pay a significant amount of taxes.

Bottom Line: Have a plan! We will get through this! And my investor course can help you through times just like these (because we all know history repeats itself!)