Real estate investing is not dead. In fact, it is a hot topic once more. The last two years for most people have been the worst ever, especially to those who are into real estate investing. Over the last two years, they all seem to give up on their investments, but now they want to jump right back in. Who would have guessed?
Yet, real estate investing is back on the upswing. Why do you ask? Because property values have dropped so low that the numbers make sense again. Housing prices in many cities and states have dropped 20%, 30%, 40% and even as high as 50% in some hard hit areas. This drop in price has made the homes more affordable. The government has also stepped in to help new home buyers purchase these homes. As well as discouraged “bad behavior” on the part of the speculators.
Now, how can one benefit from real estate investing in this recession. Think about the numbers. If you can finance a $100,000 mortgage at 6%, your mortgage payment is somewhere in the $600 range. If you add property taxes and insurance, your monthly outlay would probably be around $750. Now, lets say that you can rent that property out for $900 a month. You now have the basis for a cash flow positive investment.
In this simple real estate investing scenario, you can hold onto that property for 10, 20 years and reap great financial benefits. Why could this make sense for people? It works because, outside of general maintenance on the properties, you’re getting someone else to pay for your mortgage. And, when it comes time for you to sell, you could be the beneficiary of a big windfall, if property values increase over time.
Not everything works as planned, of course. That’s what happened over the last several years. Real estate investing people bought up properties at extraordinarily high values. And, then the market crisis hit, properties lost their value, and no one could re-finance or carry the loan payments any more.
Real estate investing is not for anyone to just go into without thinking. The drastic change of fortunes happened a few years back can happen to anyone. In real estate investing the phrase “location, location, location” is especially true. You need to make sure that the numbers are “pencil in.” Those markets may never come back again. So, if you think you’re going to take a cash flow negative property and hold on for property value increase, you should think again.
In doing real estate investing, it is extremely important to note all mentioned above. Keep in mind that there are tons of gurus (e.g. Donald Trump, Robert Allen, Carlton Sheets), companies, groups and communities willing to help you determine when and how much to invest. Also, be very careful because there are many fly-by-night gurus, who will try to sell you a bill of goods. Just make sure that the guru you are following is in the business for long years and is being followed by many.
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