In partnership with Shannon Sparks
Gary Lipsky, CEO of Break of Day Capital, shares insights for real estate investors looking to navigate an ever-changing market.
The Top 5 Things You Need to Know in Real Estate in 2023
“To thrive in the dynamic world of real estate, it’s crucial to stay informed about the latest market trends and developments,” says Gary Lipsky, CEO of Break of Day Capital. When asked what investors need to consider as they navigate the real estate market in 2023, Lipsky emphasizes five key factors of smart investment decisions: minimizing risk, leaning into local expertise, managing debt, considering workforce housing, and working with the right partners.
Be Conservative: Know Your Numbers
Lipsky stresses the significance of “knowing your numbers,” i,e., understanding your budget and knowing how much you can afford to spend on a property. It’s equally important, he says, to be aware of potential risks and stay prepared for economic downturn. Being conservative in your investment decisions can go a long way toward protecting assets.
When buying a property, conservative investors take into account all expenses and risks involved, including mortgage payments, property taxes, maintenance costs, and potential downturns in the market. They also take into account any potential upside that goes along with their investment. They never put too much money into a single opportunity because they’re always aware of what could go wrong; they prefer minimal but reliable returns over big gambles.
“The long-term perspective enables conservative investors to consistently make money over time by minimizing their losses and maximizing their gains,” Lipsky explains. “The best way to do this is to know your numbers—it’s impossible to make good decisions if you don’t know what you’re working with.”
Know Your Market: Lean Into Local Expertise
Lipsky says the importance of local real estate expertise cannot be underestimated. While national trends can be useful indicators of income growth and employment opportunities, he notes, local markets are where a region’s true pulse can be found.
“Knowing the local market can help you identify the best investment opportunities and understand the nuances of the area,” he says. That includes what types of properties are in demand, what’s happening with local zoning laws, and current economic conditions overall. By understanding these factors, costly mistakes can be avoided and investments can stay in compliance with local ordinances.
Expertise on the ground can also help you stay informed about an area’s economic conditions, from its job market and population trends to its long-term economic outlook.
Manage Your Debt: Understand Financing Options
“Debt can be a powerful tool in the real estate industry, but it is important to have the right kind of debt,” Lipsky says. This means understanding the terms and conditions of any loans you take out and ensuring that you can afford the payments. It also means being aware of the different types of financing options available to you, such as traditional mortgages, hard money loans, and private money loans. Each option offers its own set of benefits and drawbacks, and you’ll need to know what those are in order to make an informed decision about the kind of debt you should use for real estate investing.
When it comes to financing, a variety of loan types exist, but traditional mortgages tend to be the most common. These loans are typically offered by banks and other financial institutions and based on the borrower’s creditworthiness and the property’s value. While traditional mortgages can be difficult for real estate investors to obtain, other options remain, like hard money loans and private money lending.
Having the right kind of debt is crucial when it comes to investing in real estate, Lipsky stresses, and advises investors to take the time to understand each option’s risks and rewards before beginning the application process. This, he says, will help to avoid costly mistakes.
Read the Room: Invest in Workforce Housing
Addressing the need for workforce housing in 2023 is crucial for families and investors alike, Lipsky says. Workforce housing refers to housing for families that make between 80 and 120% of the median income. This segment of the population often faces challenges in finding housing that meets their needs. The gap is driven by a number of factors, including rising housing prices, stagnant wages, and a lack of affordable housing options.
Within this clear demand, Lipsky sees an obvious opportunity for real estate investors.
“Investing in workforce housing can be a smart move, as it offers a stable income stream and the potential for long-term growth,” he says. “It also plays an important role in addressing the housing affordability crisis and providing affordable homes for families.”
Leverage Expertise: Find the Right Real Estate Professionals
“Navigating the real estate industry can be a complex and challenging task,” Lipsky says, “but working with experts in the real estate industry can be a huge advantage.”
The real estate market is constantly changing, making it critical to keep tabs on the latest developments. Whether working with a real estate agent, a mortgage broker, or a property manager, linking arms with seasoned professionals can be incredibly beneficial: with their specialized knowledge and experience, they can help to identify the best investment opportunities.
“Being conservative, knowing your market, having the right debt, focusing on workforce housing, and leveraging experts are all essential for success in the real estate industry in 2023,” Lipsky says. By embracing these key principles, investors can make smarter investment decisions and achieve their goals in the real estate market.
“By working with professionals and companies like Break of Day Capital, you can make better investment decisions and achieve your real estate goals more efficiently,” he says.
Advertising disclosure: We may receive compensation for some of the links in our stories. Thank you for supporting LA Weekly and our advertisers.