Have you missed out on the opportunity to invest in real estate?
This question has been on the minds of nearly everyone who thinks they may have missed their chance. There are many Millennials, experienced investors, and even those that made millions in the last boom that are all sitting on the fence wondering if their time has passed. They have been dragging their feet, and now wonder if they waited too long to start investing in real estate. With that in mind, has the U.S. property market rebounded so fast that all the opportunities are gone? Is it too late? If not, what’s the best strategy?
Real Estate On the Rebound
Incredible gains have been made in the U.S. real estate market. Many real estate companies, and some neighborhoods have been reporting new records, and their best years ever. Competition has increased and home prices and rental prices have made sizable steps back towards their previous highs. Some statistics and news articles even make it appear as if there is little distressed property inventory left.
Of course, that doesn’t mean that there aren’t any opportunities left. But before we dig into that; it is critical to remember two things:
- Many will never see conditions this appealing and this good again in their lifetimes
- There is money to be made in real estate in all phases of the cycle
Global studies suggest markets turn on an average of 7 to 15 years. So if the market is beginning its new boom phase now, and it runs up through 2030, slowed down through 2045, a 30 year old today would be 60 years old before seeing these conditions again. Isn’t that a little long to wait before beginning to enjoy the rewards of real estate? Not that you shouldn’t start investing right away, but now is as good a time as any.
Even though asset prices and interest rates may keep on rising, there is money to be made at all points in the cycle. The best tactics and marketing may change slightly, but some of the most notable fortunes have also been made at the peak of the market, and when it appears to be plummeting. However, what is important is that individuals don’t allow fear of having missed out on the window prevent them from investing while the market is still ripe.
Where Are We Now?
Nationally, it appears that housing values are reproaching their previous numbers, while foreclosures are on their way to less than 10% of market volume. However, the other side of these figures reveals that there are still billions of dollars in distressed and foreclosure properties in the market, in addition to traditional sales. As we rolled into the New Year, RealtyTrac reported that re-foreclosures had risen 14.2% over the previous month, and over 24% year over year. In fact, in December 2014, New Jersey alone reported that 1 in every 287 housing units is in foreclosure. Other metrics have suggested it will still take several years before values return, before they march even higher.
Together, with incredibly low interest rates, those investing in rental real estate now can expect rising equity as a nice bonus to compliment great passive income yields.
The Pain of Waiting
While there are always good properties to invest in, some moments are better than others. This appears to be one of them. Those that wait can expect borrowing costs and holding costs to rise, on top of higher asset prices. That can quickly result in paying a hundred thousand or more for the same property later. That is effectively profit given away, and means less net cash flow every month.
There are always going to be excuses to grasp at if you want a reason to justify waiting longer. Fortunately, there are always solutions for these perceived challenges. There is owner financing or hard money. There are opportunities to wholesale houses to build up cash before buying rentals. There is also turnkey real estate investing for those that are short on time but crave the passive income and wealth building real estate offers.
