Why Real Estate is an Excellent Investment
Real estate is an excellent investment because it is always in demand and everyone has to have a roof over their heads. Now real estate is a commodity just like anything else in our society in when the prices get to high just like the stock market it adjust down to where the majority if buyers believe that there is value. So when real estate is high few buyers buy and when real estate is priced below the comparables, more people buy. If you buy and you’re an owner occupant and you plan on staying in your home 5 or maybe 10 years, the market ups and downs don’t really concern you too much. How ever if you are a speculator and buy near the top of the market and the values peak and turn down, you could be holding a commodity that is worth less than what you paid for it. And that does not make a very good short-term investment. So exit strategies when buying property are pretty important. Now in our recent market many speculators and home owners have extended themselves by buying expensive properties with the expectation of continued appreciation in owner occupants with poor credit and no money down, used short termed A.R.M.S (adjustable rate mortgages) and went out on a limb and got involved in property they hoped would continue to appreciate, and so because of all the speculation we have the highest amount of foreclosures than ever before. Many homeowners thought that they would be in and out of a property in a short period of time, and opted to use the A.R.M.S thinking that they would sell the property before the interest rate reset to a higher percentage. How ever because property values turned down and property owners were not able to sell their properties, their A.R.M.S reset and left them with higher interest rates and higher payments that they could not meet. Now home owners that have own property that have lost value are not so worried because the property is providing them with a roof over their heads. So they just plan on staying put and in a couple of years the prices will come back. Now the circumstances have left first time homebuyers and investors with an enormous opportunity to make some money with these foreclosures. Now given that money and real estate investment is made when you buy the property. It’s a great time to buy property at a discount with very low inertest rates; the only thing challenging us right now is the exit plans. So now with the present inventory it is imperative that you purchase at a low price and that you sale at a price compared to properties that are for sale in your area. Quick flips could take a little longer to sale and it is always best to price the property at a price that is less expensive than the other properties are going for in your particular area.
Foreclosures have been around forever, only now there is just more of them. It kind of seems to be the buzz on the street. Seasoned and novice investors want to invest in foreclosures. In 2004 the number of foreclosures was 2% of the total sales in the U.S. In the first quarter of 2008 in Stockton California, 72% of it’s sales we in foreclosures. In Las Vegas in the first quarter of 2008, 45% of the properties closed were foreclosures. So you can see why there is so much interest in foreclosures. Now the reason why they are so attractive is that if your going to be successful in real estate, you need to work with a motivated seller. And there are not any more motivated sellers than there are going to loose their homes because they are not making the payments. Now prior to this point foreclosures were typically as a result of divorce, unemployment, and medical bills. In addition to these recurring reasons today. There are also a result of the A.R.M.S loans being reset from low interest rates to higher and unaffordable for the homeowner and the property values dropping leaving no equity.
And that’s what is going on in real estate today.
