by Craig Schaid
on Tuesday, April 29th, 2014 at 11:10am.
I am so happy to finally have real estate be a positive drive in our economy and society as a way to drive us forward in the coming years. There are still doubters, but in my mind, we are in the cycle. We were in the cycle when it went down and are following the cycle going up! AND I AM READY!!
The advantage our parents and grandparents have on us is wisdom. Wisdom is derived from experience. Experience is not made up of all roses. The culmination of a wise person with wisdom to teach can surely share the blues because they have lived them. They can share the good times as well, but the difference is, they know the good times will not last forever so they take advantage of that time WISELY!
Well folks, this leads me to real estate. Take advantage of this time wisely. We are currently experiencing a once in a generation real estate experience. The sales prices are incredibly low coupled with interest rates that are absolutely at the BOTTOM. Compared to 20 years ago, they are given money away!
However, I still say walk. Don't stack yourself with too much of a great thing. Invest in real estate but don't stress in real estate. If you have been thinking about moving, do it NOW. If you are happy where you are, but have thought about dabbling in investment real estate, start NOW.
Too many people are "waiting for the market to rebound to sell". Well, it's all relative. Unless you are planning to sell and rent, your future property is going to appreciate along with your present property. Additionally, if you are moving up because of an expanding family, square footage, superior area, etc., that is going to COST you money to wait.
As much as I love to sell houses, I have had to advise many of my clients against it. There have been times when I’ve had to advise them to hang onto their current property, rent it out for a couple years, and let's see what happens. The problem is not renting it out, because the demand for good housing is enormous right now. Because of all the displaced families in the country today due to an overwhelming amount of foreclosures, the rental market will be EXCELLENT for years to come. The problem lies in qualifying for a mortgage on the new home, while still maintaining ownership of your present home. Because of current lending guidelines in the mortgage industry, even if you have your home leased, your rental income does not get counted as income until after 12 months of rental cash flow from that property. However, the mortgage payment IS counted as monthly debt. Depending on your mortgage payment, this can completely wreck your Debt to Income Ratio when trying to secure financing. Not always a deal breaker though, so worth a try. Over the long haul, if the value of your home rises 20+%, you will be glad you did!
Let's talk investment property! This in my mind, is the absolute best vehicle in long term security and wealth. We have all seen very conservative people make amazing amount of money in Real Estate. Of course, over the past few years, we all have lived or seen horror stories as well! But those people have a bit of wisdom in them now, and are smarter people! Fact is, many people have lost 100% of their retirement in stock, never to be seen again! If a house was worth $300k back in '06 and was rented for $1600, let's say it went down to $200k within past few years, well, the rent was still flowing in, actually much more stable because if it went vacant for some reason, the people that need housing were probably fighting over it! So, they have made $1600, if financed, have had tax write off's, and if not sold, have lost zero! It's not unless they decided to sell have they lost anything. If they keep the property for retirement purposes, the natural real estate cycle's pendulum will make it's swing back through and the value will most likely, exceed what it was ever worth in the past! They have now had a tax benefit, a handsome monthly dividend, and a long term equitable growth experience; both from the tenant paying down the mortgage and from appreciation! Now, imagine that being doubled or tripled by growing your investment property inventory.
Once again, I am not an advocate of trying to be an overnight real estate tycoon! Slow, methodical growth. Leveraged correctly and done with plenty of reserves and equity in the properties to see you through a storm.
Things you will need to consider are what kind of capital do you want to allocate towards real estate? Always maintain some liquid funds and some diversification for good measure. Keep in mind, many people are slowly beginning to realize that they can do MUCH better moving their stagnant money out of their 401K's into an income producing property. It's hard to match the rental income obtained when you compare it to the monthly pennies coming from the slow growth institutions or funds.
Also, do you want a higher quantity of lower end, more profitable on paper properties that have a bit higher turnover historically, or do you want less property, at less margins, with higher stability. This is purely a personal decision. Here in Montgomery County, there are several options for diversification. You can buy a moderate home in Montgomery or a little higher price point in an area that's experiencing amazing growth, Pike Road, AL. I work this out with my clients because there truly is a difference, and a match for everyone.
Whatever you decide, take slow steps, but take steps! There is NO DOUBT in my mind, that in 10 years from now, we are going to be saying what we have heard those wise people say in the past: Boy, if I knew then what I know now, I would have bought a lot of property back then!! Just think of where'd I'd be! That will be us in 2024! Let's get started!
If you would like to schedule a time to talk, consult, ask questions, etc., feel free to reach out to me and let’s set a time to discuss your future. Real Estate is my passion and I love helping people change their lives.