Real Estate is as much up in the air as it was a year ago, when the housing bubble burst. Along with the immediate panic of a year ago, there has been steadily growing worry about real estate in general as an investment. How dependable is it, and who do we believe in the press, in government, and in the media?
There’s no question that it’s a, “good time to buy” because prices are at an all time low and renting won’t give you any chance of profit. A first time home-buyer who can get out of a rental and into a home, will almost always profit by purchasing a home in a good area. Buying properties as investments, is another story.
#1 – Factor in your mortgage
There are a few decent cash-flow models out there, many of them are mentioned in a recent article by Zac Bissonnette, of Walletpop.com. The article points out that a very important part of doing calculations is including your projected financing over the course of your mortgage. It’s all fine and good to look at what you will be getting out of rent, and what you’ll be paying in taxes, but putting those numbers alongside the mortgage numbers is critical. If you go ‘old school’ and put 20% down on a 30-year fixed, you’re still going to do well if your property tracks with inflation.
#2 – Two paths diverged…
There are two very different way to go about investing- the do-it-yourself model and the easy-chair model. In the first case, you are investing in a property or properties yourself, and are fixing, managing, renting all on your own. It’s great to be able to do it your own way, and have control over your investment, but you are getting locked into something. In the other case, you are simply investing in a fund or a trust that is based on a number of properties. It’s a little less exciting, but it can be a much safer and more diversified option. Above all, know thyself; this decision has as much to do with your personality as your need for diversification and risk aversion, and taking the right path can make all the difference. For more on this choice, take a look at this recent article by Joanne Cleaver of the Journal Sentinel here.
#3 – Don’t do anything stupid
This is my favorite life rule. Please don’t do anything stupid, and if you think you’re about to do something stupid, ask a smart person. In real estate, there are a lot of people who you probably shouldn’t ask, in the same way you don’t ask a car salesman what the best make of car is. Finding an unbiased person or website can be tricky as everyone needs to make a living.
If you’re interested in investing in property (free) site, smartzip.com has a huge amount of useful information, data, market reports and research. They’re also partnered with foreclosure.com, so when you’re looking at specifics on a particular foreclosure home you’ve found, you have to option of going straight there.
If you’re thinking of going to REIT path, you can do research, but ultimately will want to talk to a personal investment professional about your opportunities- there are many ways to get into this side of real estate investing. Above all, know yourself, know your mortgage, and do your homework; if you’ve done this, yes, real estate is still a good investment for you.
Dan Perkins
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