T Nation

Real Estate Investing, Now?

With the amount of forclosures and falling house prices I was wondering if buying now and renting out until prices comeback up, is a good invsetment right now. Just for fun I was looking through housing listings on MSN and I Saw a few good listing so I called the realtor.

One of the houses I called for is 3 Bed, 1 Bath, 1,402 Sq. Ft, lot is 5489 sq. ft. in Commerce,California. The listed price was $335,000 but after calling and trying to get the price down the realtor called me back and said the owner would go as low as $285,000.

Another home is $342,900,4 Bed,2 Bath, 1,242 Sq. Ft., Lot is 6060 sq. ft and again after calling the realtor she got back to me saying the owner would drop the price down to $295,000.

Good Idea?

If you got the money it’s a very good time to invest.

I don’t think real estate has hit bottom yet but the bottom of a market is tough to guess.

Will the market rents cover interest, principal and depreciation of the properties you are looking at? I’d look closer at townhomes and condo’s myself but I know nothing about the Cali market.

If the profit exceeds the cost then yes. How much can you rent the home for, how quickly will it fill, what will your cost be with insurance/tax/closing costs etc come out too and will a profitable rent amount fit the market?

Real Estate is risky. Be careful with it. You could go months without filling the house and will have a very expensive mortgage to cover on an empty property.

The market will drop for awhile longer, no matter what real estate people tell you. They want their commission, so they will tell you whatever to get paid. This is a good time, assuming it doesnt put you in a bad position financially.

Smart people with the means to buy should do so now. Rates are low and real estate is practically on sale. If you can pick up a piece of property and plan on holding on to it for the next 3-4 years without getting yourself into any financial trouble it would be a very smart move.

If you wait to hear about your barber or garbage man saying it’s a good time to buy real estate you’re too late! Smart investors are scooping it up now.

Are you seriously asking a bunch of strangers on a weightlifting forum if you should invest over a quarter of a million dollars on real estate?

Brilliant idea.

xXSeraphimXx,

I’m a realtor in Toronto. I understand the cheerleader mentality of many agents: “It’s the best time ever to buy a house. Prices are falling, you can’t lose.”

Not true. If the agents you’re calling are the listing agents, and they’re willing to quote prices 15% lower over the phone, then you have to ask yourself what’s going on. I suspect these are properties where the owners are chasing the market as it falls, never getting the price low enough to actually sell.

Do yourself a favour - find a reputable realtor to work for you as your buyer broker. Don’t buy from the listing agent - they work for the seller and their loyalty is to the seller.

Ask someone you trust who has recently bought a house to recommend a good buyer agent in your area. Find someone who does real estate full time, and has been doing it for a few years. They have to do a good job, or they don’t eat.

Your buyer broker would normally be paid by splitting the commission 50/50 with the listing agent, so there will be no cost to you. The commission is usually paid entirely by the seller.

Make your agent work for their money. He/she should prepare a comparative market analysis (CMA) for any house(s) that you are seriously considering buying. The CMA will compare the target property with other similar, recently sold and for sale properties. You need to objectively compare apples to apples.

A good realtor who deals with investment property should also be willing and able to prepare a cashflow analysis for the property. You need concrete, realistic numbers. This is a business investment decision, so treat it that way.

Also, get pre-approved for a mortgage. You need to know what lenders will actually give you, and what it will cost. You will also show sellers that you are serious and capable of completing a deal. This will strengthen your position in negotiations.

John

The only real answer is:

It depends.

It depends on where you are buying, how much it will cost to buy, what is the rental market in the area?..

The U.S. real estate market is comprised of dozens of regional markets (that can be further delineated into local markets) and each area has it’s own set of unique characteristics. For example, the real estate market in Westchester County, NY is very different from Onondaga County, NY. Likewise with Pittsburgh and Philadelphia, etc.

So, while there are general macro-economic conditions that may impact the greater national market, individual home or building purchases in your area may be very different from elsewhere.

Tread cautiously, but downtimes present a lot of potential upside to prudent investors.

DB