No one will dispute that the pendulum has finally swung the other way.
Americans have once again fallen in love with real estate investing. As the market continues to rebound, real estate investors that were sitting on the sidelines are getting back in the game.
According to Bloomberg, millionaires view real estate as the top investment strategy for this year.
Commercial property values in the US have risen dramatically since hitting the bottom in 2009; as much as 71% in areas as far back as in 2012.
Prices topped out in 2006-2007 in most areas around the country then a major bust followed. Prices bottomed out somewhere around 2011. According to Wealth Daily, there are folks out there that believe we are in another bubble that is sure to burst. Some folks are of the opinion that the economy is being propped up by low interest rates and bank bailouts.
Could they be right?
I have no idea. I’m pretty sure we just have to wait and see how it all plays out.
Even though prices have risen on both residential and commercial real estate, there are deals still to be found. Since mortgage rates are still extremely low this means it’s still a great time to invest in real estate.
How Does this Affect the Rental Market?
The rental market is thriving.
The vast majority of people that lost their homes to foreclosure prefer renting single family homes rather than apartments. There has been a stigma attached to renting apartments that isn’t there when you are renting a single family home.
These same tenants who were previously homeowners typically take better care of the property. They also prefer renting from private landlords over big management companies.
The reason is that private landlords are much more likely to entertain a creative solution when it comes to getting them back in a home. If they have been a good tenant, they will most likely view them as a good candidate for a lease option or even a seller financed deal.
Folks that become “accidental” renters often have such a strong desire to get back into a home they will take on the challenge of a house that needs some work.
If their credit is less than stellar and they don’t have a lot of money down, sweat equity is one way a landlord can get folks into one of their properties that needs updates or even some deferred maintenance. This situation will allow the tenant to spread out those much needed upgrades over a period of time.
Inflation is Rent Friendly
If you are a landlord, it’s likely that you used OPM (other people’s money) to purchase that rental.
You bought the house with a fixed mortgage payment (or you should have) so that cost remains the same except for taxes and insurance.
As home values go up, so do your rents. Not only does your cash flow increase, but over time your equity in the property also expands leaving you with a property that is worth much more money than you originally paid for it.
If you are a real estate investor that also does at least a few wholesale deals a year, you can pay down these mortgages with lightning speed.
I believe this is one of the fastest ways to expand your wealth; paying down your mortgages using big chunks of cash from wholesaling. Making improvements to the property along the way also builds equity.
If you have been sitting on the fence wondering if the time to invest in real estate has passed you by, just get off the fence and do it. Real estate is a business that has cycles. I have a friend that has been investing for probably close to 50 years. If you ask him if it’s the right time to invest in real estate, this is what he says:
“I’ve made money in real estate when interest rates and house prices were low. I also made money when interest rates were over 15%. There is always a way to make money in real estate. You just have to understand that your business model will change as the times change. The speed with which you can adapt will determine your success or failure”.
That is great advice in my book. What do you think?
Be sure to leave your comments below!