Investing in real estate is still the single best wealth generator for many middle class people who want to keep their investment portfolio strong. Many people are still shying off from investing in real estate; however, the result of the housing crisis has turned that crisis into a series of amazing opportunities for people who are able to grab the right opportunity now.
Here are five reasons why you should be investing in real estate today!
People need homes
It’s true, whether they’re buying a home for their new family, or renting, everyone needs a place to lay their heads at night. That’s what makes housing so valuable. It’s real wealth that you can touch, understand, and remain safe from corporate raiders. Your home investment isn’t dependent on stockbrokers reading the market correctly, it doesn’t depend on a company remaining profitable. It’s your home. When you find a place in a good neighborhood, you know it when you see it. There’s no obscure prospectus that you need to research or read, nor is there some business plan. There will always be a demand for homes, and because of that, the value will generally always go up (notice I said generally – housing bubbles notwithstanding).
Crisis creates opportunity
It’s true. The amount of undervalued homes and deals on the real estate market today is making many investors salivate about the upcoming recovery. The downward adjustment of prices during the housing bubble created many bargain basement deals on homes that previously sold for many hundreds of thousands of dollars. There’s no guarantee that the price of those homes will go up to those skyrocket type prices of course, but, buying a home right now that’s below market value will always pay off in the long run. With the current housing recovery underway in the US, a lot of that cheap inventory is being snatched up by banks and investment firms who are looking to pad their balance sheets with appreciable assets. With the reduce inventory, prices will again rise and you’ll be able to see real money from your real estate investing.
Long term thinking over short term flipping
One of the biggest problems that came out of the housing crisis were the people who bought homes to flip them quickly (within six months of escrow closing) after upgrading fixtures or trying to increase the appeal of the home in some way. Buying up foreclosed properties without a good way to flip them quickly is a great way to expend your extra income on upkeep and maintenance of properties that are not making you any income. When investing in real estate, it’s best to take a five year look at your possible sale. Spend what you can over the years to help upgrade the property so that when you are ready to sell, you’ll have a bunch of added extras to entice a high price or more potential homeowners who will want to bid on your place.
Reduce your risk
Depending on how much you have to invest, you’ll want to make sure that you’re buying properties across a large enough area so that if one neighborhood isn’t performing as well as you thought it would over the years, you’ll be able to make up for it in another one that perhaps gentrified faster than you thought it might. The properties you want to buy should be scattered across the metro area – for instance, if you can afford it, buy a condo in the downtown area as well as a starter family home in the nearby suburbs. You’re now more likely to have one (or both) increase in value, with one increasing more to make up whatever losses you may incur over the years.
History shows real estate goes up
Housing was overvalued for a time starting in 2005 – 2008, but, after the adjustment, housing prices have come back down to more traditional levels commiserate with the history of the market. History tells us though that despite whatever adjustments that happen during recessions/bubbles, housing is still a very reliable performer for investors. There is a long history of steady, long-term gains in the housing market. Generally most people can expect a five percent return on their investment.
Smart investors should shy away from those markets that are beginning to spike and have low levels of inventory. Research your area and look for places that have the potential to become the next “it” neighborhood in your city. Good luck!