Are You Taking Advantage of the Current Real Estate Market Conditions?

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Back in November 2009 I wrote an article titled “Home Ownership Below 50%… Is That Possible?” One of the major points of that article was a prediction from a real estate agent that home ownership would continue to decline from its high of 69.7% at the height of the housing boom to below 50%.

Provocative prediction… wasn’t it?

Well, it seems that we are heading towards that 50% ownership rate faster than one could have imagined.  Currently the home ownership rate is at 66% with further predictions that it will be at 62% by 2011.

In this recent MSNBC survey/article, it looks like over 25% of all renters (that could be as many as 25 million renters) don’t plan on ever purchasing a home.

Couple the reasons for not buying presented in the article above with a growing population, loss of rental inventory, and very little new housing construction and you can understand that…

We are in the middle of what should be buying frenzy.  

Not convinced?  How about this . . . in the middle of our continued recession and high unemployment rates, vacancy rates are heading steadily downward with predictions (thanx Rich Weese) that the vacancy rate will effectively be ZERO by 2012!  ZERO vacancies? You have to wonder if that is even possible!

When I got stated in real estate investing (2001) I used to think that the relationship between purchase prices and rents that could be charged couldn’t get any better.  In fact, from 2001 through 2005 I thought I was a genius because I could buy, renovate and rent properties that generated net cashflow per property routinely exceeding $200 per month, and the duplexes generated even higher cash flow.

Based on the opportunities in almost all markets today, I would have been tagged as the class dunce for thinking I was doing well with just $200 net cash flow.

No, in today’s market the relationship between purchase prices and rents just keeps getting better: ever cheaper purchases with declining vacancy rates and increasing monthly rents. 

Opportunities like this don’t come around very often.  In fact, a case could be made that the last opportunity like this occurred back in 1930.

What are you doing about this current opportunity?

Jumping in with both feet buying up everything that comes your way?

Sitting on the sidelines waiting for things to improve?

Wishing you had cash to move your offers to the head of the line? 

If you answered yes to the very first item, congratulations, and best of luck going forward!

If you find yourself somewhere in the middle of the last two items and you are serious about creating passive income and positioning your business to create true wealth, then you have got to find a way to overcome the obstacles and jump in.

Best of luck!

Photo: Gabriel

About Author

Peter is an active and successful real estate investor in the Baltimore Maryland region for the past 8 years and is one of the founders of The Club Mastermind a real estate investing coaching program focused on local coaches helping investors to perfect their game.

14 Comments

  1. Great article Peter, I totally agree it is an incredible time to buy and set yourself up for life. Home ownership going down is an interesting trend. Any chance you can provide the source for the % and predictions? I would like to read more.

    • Ryan, to be honest… the figures I used were from a post that Rich Weese had made that day in one of the forums. Rich got his info during a seminar he attended and he did reference the source of some of the data.

      Also, I find most of this info in the BP bulletin articles and on various other web sources… like housing wire, CNN, etc.

      Pete

  2. Jeff Brown

    Hey Peter — Don’t know how many 10s of thousands of words I’ve published the last several years tryin’ to get folks to see what, as you strongly imply, might indeed be the writing on the wall. It’s my contention many remain on the sidelines due to the disconnect between the current irrefutable data, and the way they’ve always done things. Once they adjust the latter, however, the gleam in their eyes lights up the room. 🙂

    Do the deal, assume 0% Price/NOI appreciation for the duration of the hold. Still like it?

    Make it happen.

  3. Peter, this idea has been floating around in my head for a while for the past few months, but i couldn’t quite pull all the pieces together. The big picture is poppulation is not changing, so if foreclosures continue to plague homeowners, it only makes sense that the % investment properties has to be rising.

    It would be interesting to see what demographic areas are being affected the most. Is it subprime neighborhoods that went from 75% owner to 15%?

  4. @ Shae, those are good guidelines. You mention private funds, are you using private funds to buy rentals? If so, for what length of time are you securing the funds?

    Although during this year I have been concentrating on rehabbing and selling I have been dying to acquire more rentals. The problem is securing long term funds to purchase the rentals. The other plan is to use part of the profits from flips to buy rentals cash.

    How are some of you gobbling up rental properties?

  5. Luis,

    Cash is definitely king these days so private money or partnering is a way to as you put it, gobble up some rentals. Very nice use of gobble by the way, HaHa.

    There are lenders out there, for instance in OH you can get interest rates for investment property loans at only 4.99%. You have to put some money down, but the cash on cash returns sky rocket using leverage at that low of an interest rate.

  6. Ryan, you are correct, I have run into some of the same lenders but since I am currently undergoing the transition from having a W-2 in my old job to being a full time real estate person (therefore self-employed) some of these lenders don’t want anything to do with me even though I could do the 20% down.

  7. Partner, private money, try small local banks, get creative. Search until you find a financing solution and don’t give up. The banks will come around eventually but it may be too late. If you can gobble some rentals up with private funding, with partners or in a creative fashion then you can probably refi in the future, maybe even use a blanket loan.

  8. This is a great post and so true! It’s staggering to think that 50% homeownership could ever be a reality. I can understand the mentality behind the downfall of the economy, the trends of the market, and the troubles that lenders have experienced over the past few years, but at some point, I think it will change. I guess the bottom line is that how can you NOT think about buying a house in such an incredible buyers market.

    There’s my two cents. Thanks for the post!

  9. This is a great post and so true! It’s staggering to think that 50% homeownership could ever be a reality. I can understand the mentality behind the downfall of the economy, the trends of the market, and the troubles that lenders have experienced over the past few years, but at some point, I think it will change. I guess the bottom line is that how can you NOT think about buying a house in such an incredible buyers market.
    That’s my two cents. Thanks for the post!

  10. im still interested in real estate investing since it can make people become a millionare. but is this a great time to start in? what if real estate crash again?could you help me please?

  11. Jeshudas,

    There are a variety of articles on this new blog which should help to temper your concern regarding now being a great time to buy. I would suggest you look through these articles and then make you judgements from there.

    You see… the best time to be buying any investment is when others are selling and that asset category experiencing turmoil and confusion. If you accept that as a premise then now is the BEST time in history to be buying.

    The key for any investor is to learn how to navigate the terrain to identify and then mitigate the risks involved in this market. That takes time and experience.

    I am not sure what help you are looking for from me so I am not sure where to start.

    Best of luck!

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