Real Estate Investing
Real estate investing is a hot topic again. It’s a funny thing how one day everyone wants to dump their real estate investments and the next day everybody is jumping back in. Well, it’s no wonder. The real estate investing community went through such a gyration, including all of the crazy buying that speculators went through over the last few years. The last two years have been one of the worst in history.
Yet, real estate investing is back on the upswing. Why do you ask? Because property values have dropped so low that the numbers make sense again. Housing prices in many cities and states have dropped 20%, 30%, 40% and even as high as 50% in some hard hit areas. This drop in price has made the homes more affordable. The government has also stepped in to help new home buyers purchase these homes. As well as discouraged “bad behavior” on the part of the speculators.
Now, how can one benefit from real estate investing in this recession. Think about the numbers. If you can finance a $100,000 mortgage at 6%, your mortgage payment is somewhere in the $600 range. If you add property taxes and insurance, your monthly outlay would probably be around $750. Now, let’s say that you can rent that property out for $900 a month. You now have the basis for a cash flow positive investment.
In this simple real estate investing scenario, you can hold onto that property for 10, 20 years and reap great financial benefits. Why could this make sense for people? It works because, outside of general maintenance on the properties, you’re getting someone else to pay for your mortgage. And, when it comes time for you to sell, you could be the beneficiary of a big windfall, if property values increase over time.
Not everything works as planned, of course. That’s what happened over the last several years. Real estate investing people bought up properties at extraordinarily high values. And, then the market crisis hit, properties lost their value, and no one could re-finance or carry the loan payments any more.
This drastic change of fortunes could happen to anyone. Real estate investing is not something that anyone should just go into haphazardly. Many of the age old phrases, such as “location, location, location” are especially true in real estate investing. Also, make sure the numbers “pencil in.” If you think you’re going to take a cash flow negative property and hold on for property value increase… think again. Those markets may never come back again.
This is why it’s extremely important to know what you are doing in real estate investing. There are several companies, gurus, etc. who purport to tell you how, what, when and how much. Many of the gurus are fly-by-night scammers. They will try to sell you a bill of goods. You should make sure to look at gurus who have been around a while and have a loyal following. Some examples of these people are Donald Trump, Robert Allen or Carlton Sheets. Basically, they’ve been there, done that.
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