Is right now a good time to invest in real estate?
Given everything going on in the market and economy lately, many people have been asking about whether now is a good time to invest in real estate. Ours is a very strong seller’s market, and it’s often hard to find good homes to buy. Since there are so few for sale, homes have been appreciating at a very good clip, which is great for the net worth of homeowners and investors. However, interest rates remain historically low, which helps offset the rising home prices.
Now, whenever people invest in real estate, they typically do it for one of a couple of different reasons: they’re looking for monthly cash flow and/or to increase their net worth. The ideal investment property will get you cash flow and appreciate over time.
Many people think that after they spend all the money needed to purchase an investment home, the cash flow received after the mortgage, maintenance, taxes, insurance, and so on are paid isn’t all that good. Those people just aren’t looking at the big picture; yes, there is a limited cash flow to start, but you’re also generally going to receive some incentives on your income taxes. Speak to your accountant or CPA for more information about the tax benefits associated with investment properties.
If you’re just looking at your property’s monthly cash flow, you’re not looking at the total picture of what your investment is returning. If you have it rented out, your tenant is paying down the home and building equity for you while the home appreciates, which creates an even higher rate of return. Traditionally, you can get a better rate of return by investing in real estate than you can by investing in stocks.
“The ideal investment property will get you cash flow and appreciate over time.”
Now, if you’re looking to purchase your first investment property, we typically recommend that you find a home at a good deal. Ideally, look for a home that’s 5% to 10% under retail value. That could be a challenge in our market, but if you’re searching for investment properties, reach out to us. We’d be happy to help you find a great deal.
If you already have another home, we usually recommend that you put down 20% to 25%, which just helps lower the monthly payment and boosts your cash flow a little.
First-time buyers could buy a home to live in for a while, then buy another home within a couple of years and retain that first house as an investment property. The great thing about this option is that you could put less money down. If you’re buying a home outside of Evansville or Newburgh, there are loan programs with which you could possibly get 100% down, or you could do an FHA loan and put down just 3.5%. With these programs, however, you do have to live in the home as your primary residence, but these options could help you get in with less money down and you could hold the property until you plan to buy the next one.
So in the end, yes, right now is a great time to invest in real estate. If you have any further questions about today’s topic, feel free to reach out to us. We’d love to help you.