Trends in the current real estate market
Q: Bob, there have been a lot of people making money in real estate. Any thoughts on today’s market?
Allen
A: Allen, yes, there are people making money in real estate. The days of small time (in my opinion) investors making a killing in real estate are now over. Home prices in once hot markets in California, Nevada, Florida and elsewhere have plummeted. The Federal Reserve predicts that housing prices during the next two years will grow at the slowest pace in more than three decades.
Despite these trends, one real estate strategy will excel- buying and renting out single-family homes. You don’t have wealthy to be a successful landlord. You can use the equity in your existing (if you don’t have cash- which would be preferable) home to get started, and you may qualify for generous tax breaks.
Owning one or two rental properties is a classic get-rich strategy.
Rental income covers the mortgage payments and operating expenses while providing you with a small cash (assuming you buy the house right) flow.
It takes less time and is less risky than managing a stock portfolio, and there is always an up and down real estate market (hopefully?) that is waiting to be discovered.
However, you can increase the rent to keep up with or out pace inflation over the long term. You can also expect a profit (if again, bought right) when you sell- historically, home values have appreciated by about 5 percent a year, which is above and beyond the rental income.
How to start making money in single-family properties. First find the right kind of house. Look within a 15-20-mile radius of where you live.
You’ll be better able to figure out the value of real estate in a familiar area. Unless you live in a hot market (ha! Ha!) you should be able to find affordable properties in your town/city. In this market that should be no problem. Look for mid-income neighborhoods, since homes in these neighborhoods stand the best chance of appreciation in price.
Try to buy sought-after properties- three bedrooms two baths appeal to a range of renters/tenants. Try to avoid houses with only one or two bedrooms with one bath. They may be less expensive, but they are harder to rent or sell.
Avoid condos or co-opts. You lack control. The building association may reserve the right to approve tenants. For instance, applicants might be turned down if they are pet owners.
Look for popular features. Choose a house that has at least one of the features that renters desire- fenced-in yard, garage, central air conditioning, proximity to the best schools, public transportation, supermarkets and shopping districts.
Next week I will tell you how to find the right deal.
Have a real estate question? Write, call, fax or e-mail:
Bob Jeffries, Realtor,
Century 21 Birchwood Realty, Inc.
4040 Del Prado Blvd., Cape Coral, FL
239-540-6659 Office 239-542-7760 Fax