Is now the time to invest in Real Estate?

**Broken Arrow** · 06-23-2010, 02:01 PM

Well, it depends on your idea of a real estate investment?

I think the first homeowners credit program (of up to $8000) has just ended. Sure, the credit incentive created an artificial demand, but it wasn't massive, and one can still find good buys out there fairly easily.

Now that it's over, the short-term real estate market has dropped, and most speculators have already cashed out at this point... but may be buying back in I don't know.

Again, it depends on what you define as an investment. REITs? Flipping or being a landlord? What about time frame?

Without further details, my personal opinion is that residential real estate is for living, not investing. I just don't like it much.... I've seen what it can do to one's liquidity and bottom line. My sister sunk a lot of money in real estate, and come to think of it, so has many of my relatives. And now, they're either waiting it out for a few more years, or they can't sell it fast enough because their money has become tight.

Bottom line, I say buy only what you can afford.

**maddog21** · 06-23-2010, 02:40 PM

I was thinking buying up a few single family residential properties around 100k each. Of course I will need a loan but I can come up with 20% down. Do you prefer going for commercial since you don't like residential? I would say my time frame is 5-7 years. How long ago did your relatives invest and what went wrong?

**97guns** · 06-23-2010, 03:18 PM

i think its an awesome time to buy residential real estate for investment purposes, but you know what they say about opinions. i have backed my opinion up though - ive picked up 4 SFR for rentals since the bubble busted. all my buys were last year and all under 100K, they were all going for 300-375K before the crash so i bought in at a huge discount. 2 were all cash deals and i financed the other 2, im into them for 200K and since febuary of last year my rental account has 27K in it which comes out to a good 10%+ ROI. prices in my market have climbed a little, i still look at the listings every week and there is hardly anything for less than 100K now with comparables that i bought going for 110-120K - so on top of making the 10% on my investment im also looking at a good 25% capital gain, on paper at least. again IMO buying in this severely depressed market your risk is very minimalized and another opinion is to stay away from comercial investment property. i really know little about it but what i can tell you is that whenever i go shopping im looking and i see a lot of retail space for lease. my rentals are doing very well, i just turned 40 this month and do not work anymore.

**97guns** · 06-23-2010, 03:23 PM

one other thing, given i can net 20-27K per year on the rentals i would have my entire investment returned to me within 10 years or less then everything else is pure gravy. you can listen to non believers untill doomsday but my numbers are fact and i dont care how bad the economy gets people will always need a place to live. you may not get the top dollar for rent when the economy really tanks but at least for me in my market i will always be positive cashflow.

**maddog21** · 06-24-2010, 05:59 AM

Thanks 97guns. I appreciate the facts that you presented. Currently I own one residential property in the market I am looking at and the only reason is that it was my wife's house before we got married. She paid 142k right before the bubble burst and now comparable properties are going for 100-115k. She also got a terrible mortgage so basically the rent just breaks even for us. I tried to refinance and the bank wanted me to drop another 20k into the house which was laughable. I think I am going to start looking at properties ASAP. Hopefully now that the home buyer credit is done I will be able to get an even better deal.

**disneysteve** · 06-24-2010, 07:23 AM

Originally posted by maddog21 View Post

I was thinking buying up a few single family residential properties around 100k each. Of course I will need a loan

Would you borrow money to invest in stocks? How about taking out a loan to open a mutual fund account or buy treasury bills? I'm guessing you wouldn't but you are talking about borrowing 80% of the money needed for an investment.

When buying a primary residence, I think a 20% down payment is good. For an investment, I think it needs to be a lot more than that if not paying cash entirely. It is much easier to have it be a positive cash flow when you don't have a ton of debt to manage. Rather than buying a "few" homes with 20% down on each, buy one home with 60 or 80 or 100% down. Then use the profit from that rental to save up to purchase your next property for cash and so on. Don't let your investment strategy be dictated by market conditions. Yes, there are surely bargains to be found out there, but if you have to take out big loans, you can't afford them.

**97guns** · 06-24-2010, 07:48 AM

for me when i ran the numbers the ROI got better the less money put down. the ROI % is better on my 2 financed properties than it is on the 2 cashed out ones but i have greater positive cashflow on the cash ones. i did end up putting 20% down on each of the financed properties that i have. with these supressed prices your not putting up "a ton" of money to get into one. my 2 mortgages are 54 and 70K with payments of $306 and $407.

another thing is that your tax deductions are awesome. mortgage, vehicle, all your expenses are tax deductable. i actually got a refund this year for the first time in 15 years but i will have to file for estimated tax for next years taxes once my unemployment runs out.

**disneysteve** · 06-24-2010, 08:09 AM

Originally posted by 97guns View Post

for me when i ran the numbers the ROI got better the less money put down.

That is true but only if the property remains fully occupied, the tenants pay the rent and the property maintains its value. I'm not denying that leverage works. It is just a lot riskier. How many people out there are now upside down on their property and renting with negative cash flow or own rentals that are sitting vacant with zero cash flow? If you own the property outright, that isn't nearly as big a deal as if you have a big loan to carry.

**Broken Arrow** · 06-24-2010, 08:30 AM

Some people will always be convinced that their favored asset class is better than others, especially for those who are experiencing sunk costs....

**maddog21** · 06-27-2010, 11:37 AM

I know that occupancy is the most important aspect of any real estate investment and of course that is the scariest part as well. That being said I think I am definitely at a point in my life where I need to be taking some level of risk. I have a friend who works for a very well known real estate investment firm and basically their model is that if the return on investment is positive try to leverage it all. Basically, they are risking the minimal amount of money to maximize their returns. I would do the exact same thing right now if the bank would give me a 100% loan to value since the numbers would work. But, thanks to the mortgage melt-down we know that's not going to happen

Maybe another possibility is to seek some kind of venture capital funding instead. Thanks for all the great comments btw.

**amarowsky** · 06-28-2010, 05:58 PM

I think right now is a great chance to buy at a premium. As long as you have a steady income to fund the loan and don't get greedy and bite off more than you can chew. I'm a first time home buyer and I'm looking for a house now. I plan on getting room mates and using the money they pay in rent to help pay off the principle . Then after its paid off I want to try renting out while buying another house to live in. I'm excited for the opportunity. I wish I had an extra year saved so i could be a little more aggressive in my plan.

**maat55** · 06-29-2010, 07:02 PM

IMO, the market will likely drop further than move up. I predict a bloodbath between now and 2012.

**godsboy7777** · 06-30-2010, 03:08 AM

When it comes to South Africa and investing in property now is not a very good idea.

They have made a mess of things here.

**ndeluca** · 06-30-2010, 09:02 AM

Apparently there is a good deal of money to be made right now on the short side within the state of New Jersey.

Is now the time to invest in Real Estate?