If you depend on real estate brokers, developers, finance companies, or online gurus, now is always the best time to invest in real estate. Or is it? The real answer is “that depends”. If you’re looking in areas such as Seattle, Boston, Los Angeles, the San Francisco Bay Area, New York, Denver, or San Diego, great caution is recommended because homebuyers are finding it challenging to match their income and buying power to the sky-high prices being asked for houses. On the other hand, look at the mid-west and you’ll find housing remains very affordable. If you already own investment real estate in these hot markets, now is the right time to consider selling there to buy 3 or 4 properties that are still affordable.
You work hard for your money and it should work at least as hard for you. Several sources report the average U.S. savings account pays a measly 0.06 percent annual percentage yield and many of the largest financial institutions in the U.S. are paying down around just 0.01% APY. The past year, the inflation rate has been hovering around 2.0%. If your spare money is sitting in a savings account (or worse, under a mattress), you are losing money every month due to inflation. So real estate investing is logical way to make your money grow for the long term.
Any predictable and reliable investment is your better answer. Real estate is a reliable and predictable investment. But always remember it is about timing and location, location, location. The U.S. GDP has been revised up to an annualized growth rate of 3.1% from 3%. This is the fastest rate since the first quarter of 2015. With due diligence, you can expect your real estate investment to significantly outperform the GDP. Just be aware the recent hurricanes indicate a slowing of the GDP – primarily affecting the hurricane region (location).
Think again about those low bank interest rates. Now is the time to make them work for you. Although the interest rate you’ll pay has bumped up slightly over the past year, rates remain at historic lows. The expert consensus is a less than 8% chance of a rate increase the remainder of this year. Serious real estate investors leverage their own money by borrowing. As long as your investment outperforms the interest rate (plus after tax-deductible business expenses), it’s an opportunity for you to leverage your money into something much bigger.
Banks are loosening the reins on lending standards (slightly). You won’t get the 125% loan-to-value financing that some investors over-qualified for during the 2000s. However, if you have a job and decent credit, qualifying for a loan with less than a 20% down payment is obtainable.
Yes, on the whole, home prices have risen dramatically since 2012 but that doesn’t mean there aren’t still deals out there. There are (and always will be) foreclosures on the market. Not a lot but investors dig deep to find the best opportunities. Another good source for people in a hurry to sell at a discount are estate attorneys representing heirs that don’t want to hassle with a sale at a distant location. Also consider divorce and bankruptcy attorneys representing people with bigger problems than selling a house but desperately needing the cash. Accountants are worth checking into as well.
It takes some searching but I know one guy that bought a house for half its value because the seller was going to jail in 7 days if he didn’t pay his ex-wife the full $40,000 he owed in back payments. You may think of these investors as scavengers but the truth is they offer a service that some people desperately need. The same for investors offering to “buy any house, in any condition”. Regardless of the current macroeconomic climate, there are always people in need of fast cash.
Another reason why now is a good time to invest in real estate is that technology has come of age for the investor. Whether you are buying, selling, renting, or looking for a handyman, it is all automated and online. You can receive automated email alerts for new listings. Take virtual tours of houses and neighborhoods. Even if your banker won’t qualify you for a loan, you can seek financing through crowdfunding websites, or a plethora of other third party financing sources.
Where you need to begin is by availing yourself of all the free knowledge available online. Along with RealtyBizNews, there are is an ample supply of free blogs, podcasts, eBooks, and many other resources to learn about any real estate investing niche. You’ll come across some bad advice but the more you learn, the more easily you’ll be able to separate the good from the bad. If you don’t start now, in another 10 years you’ll wish you had.
What do you think about today’s real estate investing opportunities? Please leave your comments below.
Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 10 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.