Why to Invest in Real Estate NOW

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You have probably heard over and over again lately about the phenomenal buying market out there for property enthusiasts. In fact, even if you are not a bona fide investor it is still a great time to get into the business of investing in property. One of the reasons for this ripe environment to invest and actually make significant amounts of money on that investment is the low costs of obtaining property that we are seeing today.

Today’s Low, Low Cost of Financing

Not only are homes priced lower but also the actual cost to borrow money to purchase the homes is also lower. Not too many years ago the cost of a mortgage was as high as many credit cards are today and when you compound that into 30-year fixed mortgages, the finance charges become astronomical. With today’s interest rates, however, monthly payments for the same house you might have purchased at the old interest rates are much lower.

Let’s look at a $200,000 home. If you financed it back in the 80s when rates were as high as 16% (or more) the total monthly payment amount would be about $2,900. Factor in today’s record-setting interest rates and the monthly payment is more than fifty percent less at around $1,200. This is for the same house!

Home Prices Remain Very Low

After the infamous market crash of 2007, housing prices plummeted and they have remained at or near bottom for quite some time now. For buyers and investors this translates to one of the best opportunities – especially when combining low home prices with record low interest rates. Not only is the home affordable, but so is the cost to borrow money to buy it.

Consider the example above of the $200,000 home. If your budget is $200,000 and you were not buying in today’s market – how much home would you be able to afford within that amount?  Of course, what you would be able to get will depend on location, neighborhood, style of home and other factors. But in general, the amount of house you would be able to afford ten years ago does not even compare to what you can get today for the same amount of money.

Invest for Pennies on the Dollar Now – Enjoy Sizable Returns Later

When billionaire investor Warren Buffett was recently asked about the best investment sectors of today he suggested investing in single-family homes on a 30-year fixed rate mortgage. This advice came in light of current market conditions that end up in pennies on the dollar investment schemes. Buying a home today for under $200,000 will easily yield more than double the returns by the time the mortgage is paid off. Many savvy homeowners today are also making extra payments to shorten the term length of their mortgages.

With the plethora of investors and buyers that are delving into the property market to seize the opportunities out there, many have been turning to any means possible to come up with the down payments. Whether dipping into savings, obtaining a home equity line of credit on an existing home, converting the purchased home into a rental property – buyers are getting creative.

If you would like to explore your options and find out how you can take advantage of the amazing investment opportunities right now, contact us today. We would love to guide you and come with up with some ideas that work for you.

Moving Out? In Today’s Real Estate Market, Which is Better, Renting or Selling?

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Contrary to what many experts, news media or analysts may have you believe, market conditions are not as bad as they are portrayed.  In some areas inventory is down, prices are up and the general consensus is a positive one, moving up in a positive outlook for the future.  But the question does arise when one is moving from a home – whether selling it now or renting it to hold out for a better selling price makes more sense.  Here we’ve put together some considerations that will help you discern which is the better choice for you.

Real Estate Is Always a Gamble, Now’s Not Any Different
There is no real way to tell exactly how the market will behave at any given time in the future but currently all trends reasonably point to both options being equally as viable.  If you opt to keep your home and rent it out, say for the next couple years or so, then there is a chance that prices will hit rock bottom and then begin to climb up again during that period.  However, there is also a chance that prices continue to plunge – in which case you would have been better off selling while a bit ahead of the game.

The main thing to keep in mind here is that even though things go up and down in the short term, real estate is a great long term investment and it’s fair to say that ultimately there will be a gain on your property value.  

Buyers’ Market Today, Who Knows What Happens Tomorrow
So many indications of it being a strong buyers’ market these days make it seem that the opportunities on the buying end of things are endless.  However anything can change and it can change fairly quickly.  Take our current interest rates.  Though buyers have been used to seeing such historically low interest rates for some time now, if the government decides to raise the rates it will instantaneously change things.  Since buyer’s ability to purchase will be affected in a major way, prices will concurrently come down. 

Heavy Foreclosure Inventory Appears to Dominate The Coming Path
Nationwide there are literally millions of foreclosure properties out there that need to go through the system.  As foreclosure and short sales flood the market, prices will plummet as a result of these distress sales.  In some markets this trend has crept into the upper-end niche of the real estate industry.

Why Renting Can Be Risky
If a homeowner rents out their property and while it is on rent the condition of the property suffers some damage – then they have negatively impacted the value of the home during a time when they had hoped for an increase in value.  This is the single biggest gamble when it comes to choosing to rent your home rather than selling it.

Also, there is no way to tell what the condition of the selling market may be when it comes time for you to decide to sell. 

Consult With Your Realtor To Assess Your Options
Realtors deal with myriad situations on a regular basis and they also intimately know the statistics of your neighborhood and surrounding areas.  By consulting with a trusted and reputable Realtor in your neighborhood, you can gain ample perspective on exactly how your property might fare in today’s market conditions.  An informed decision would be made, given the factors at hand so you can be assured that your choice is the best as per your own situation. 

Seize the Opportunity! It's One of the GREATEST Times in History to Upgrade Homes

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We have all seen the media reports of how the real estate market has been down in the dumps for years now.  But at the same time, we also see reports of how this is an excellent time to buy a house, whether as a first-time buyer or an existing homeowner looking to upgrade into a newer, bigger or better place.  To help illustrate how this can be true, despite the unstable real estate market, here is a simple equation with three parts:

SALE OF THE EXISTING HOME, PURCHASE OF A NEW HOME, INTEREST RATES

Selling The Home You Are Living In Now
Basically, you have two choices if you are thinking of selling your property – either do it now or do it later.  Selling it now would mean that you would suffer the loss of the last ten years’ worth of value downgrade.  For the last decade or so, home values have steadily dropped, to an average of about 10% less than what they were before.  So assuming a $200,000 home in this equation, consider the next level.

Buying A Bigger and Better Home

A reasonable upgrade to a home that, say, has a list price of $350,000 is an exciting prospect especially since its value just five years ago would be about $420,000.  Not only would you be buying more house, with the average square foot costing far less than it would have just a few years ago, but a few years down the line when the real estate doom starts to rebound, you will be sitting in a house that is worth much more than you purchased it for.  How is that possible?  The third part of our equation is how that is possible.

Financing On Super Low Interest Rates
There is hype all over the place about the historically low interest rates we have been seeing on the market for quite some time now.  This will not last – but while it does, the 30-year fixed rate mortgages that are available these days [to qualified buyers] are as low as 4.5%.  This is almost unprecedented and coupled with the buyers’ market that it is with the inventory levels we are seeing, this is quite simply the best time to buy and at the best rates.

Why Buy Now Instead of Waiting For Later?
Given the three parts to our equation, the question many homeowners ask is now or later.  To answer this, here is a simple chart that demonstrates what would happen if you sold your home now vs. later and if you bought a new upgraded home now or later – both scenarios taking into consideration the changing values of property.

Existing Home New Home Interest Rate Difference Saved
Upgrade Now $200,000 $350,000 4.5% $15,000
Upgrade Later $220,000 $385,000 6.5% -

To explain this further, 

Assume your home value goes up 10%, from $200,000 to $220,000.
But the new home you purchase would also increase in value, putting the original value of $350,000 at $385,000 in just a few years.  An important consideration is that the higher the mortgage, the higher your interest rate, (in other words loan amount conforming to conventional rates has gone down) which will affect you as time goes by and the current opportunities will no longer be there to avail.  The new interest rate that would go along with inflation would be an expected 6.5%, meaning that money for your mortgage would cost you more.

Keeping all these factors in mind, it is clear why now is the best time ever to be selling your home and upgrading into a new home.  The money saved is a sizable chunk of a down payment for many homebuyers. In this example, about $15,000 is the amount saved and the best part is that the super low mortgage rate gets locked in for thirty years.  

When you work out the numbers in the long run it is clear that availing the opportunity out there now is the perfect solution to owing the best possible home in the future.