For three years, real estate was every investor’s darling. Double digit appreciation paired with low interest rates made real estate investing appear to be a no-brainer. However, the real estate investing playing field is littered with the bodies of house flippers and cash flow mis-calculators. The next few years will be easier to make money buying real estate than the previous “boom” years. The question is, who will recognize the opportunity and take advantage?
The opportunity to make money buying real estate lies in the overwhelming need for real estate buyers. In a classic sense, investors plus home buyers equal demand. However, in light of the credit crisis, mortgage disaster, and housing bust, for the first time since the Depression their is a true need for investors to buy property. Foreclosure has become a staunch reality for thousands of Americans. Foreclosure is looming for millions more. Banks are completely overwhelmed with late payments, loan modifications, foreclosures, and Bank Owned Real Estate.
Here is the most commonly over-looked key to the current real estate investing situation: bank rates. Go check out the current mortgage lending rates. They are still in the low 6% range. Historically, that rate is rock-bottom. Collectively, American’s have been taking these rates for granted for five years now. If you have a real estate agent worth their salt, or a HP12C financial calculator of your own, calculate what your money buys at 6.25% vs. 9.25%. It is staggering.
These rates will not last. How do I know? It is very simple. I know that they will not last, because they never do. Rates go up and rates come down. They bottom out just under 5% and go as high as 21%. They average out somewhere around 9%. Our rates have been unusually low for years. It will not be long before they start creeping up. As rates creep up, you can buy less home for the same monthly payment. So, even if values are sliding moderately, you stand more to lose by waiting out the market to find the bottom of the real estate market.
To make money buying real estate be sure to do your homework. Knowing where the opportunities are is one of the most important pieces of research to uncover. All market conditions provide opportunity for the savvy real estate investor. This market is becoming so easy, the savvy part of the equation may soon be optional.