Should You Invest In Real Estate Now?

One of the biggest questions people are asking about real estate investing is ‘what should I do now’? Even though the current economy is causing many people to question everything, AND making people experience fear, basic rules of finance and investing still apply. Investors simply must adapt their strategies to work in the current environment. Having said that, investing in residential real estate still makes great sense.

Remember, the purpose for investing in residential real estate is to make money. Many investors built their entire business and philosophy on flipping houses, and this strategy is VERY difficult now. Savvy, successful investors will adapt their focus on the investing activities that will make them money today and later. The old standby of cash flow investing is one of the best options the investor has today. Investors need to remember that wealth is the ability to earn cash flow without having to work for it. Rental real estate fits this definition and this is why rental property has always been a solid wealth builder for investors.

The answer to the question above is that you need to be buying investment property for your personal portfolio. The focus is on taking advantage of the great values in property pricing, while enjoying rental rates that have not fallen at anywhere near the rate of property values. This economy has created the perfect opportunity to buy houses and rent them at incredible cash flow rates. Simply put, you can buy at the bottom of the value cycle, get rents that have not gone down, finance the purchase at incredibly low rates and create an amazing cash cow that will last as long as you desire.

This is the best time in decades to buy residential investment property. If you have cash sitting in CD’s, IRA’s, money market accounts, or other “traditional” investments making around 1% (or losing money!), you need to look at investment real estate. A good rental property will provide around 15% cash on cash return on your investment if you pay cash for the house. That is obviously far better than the majority of standard investments offered by traditional financial services firms today. If you decide to finance your purchase, your cash on cash will go up.
Many of you remember the S&L crisis of the late eighties and early nineties. I would be willing to bet that many of you lamented the missed opportunity you had when houses were being sold at ridiculous discounts. Well, here’s your chance again. Many experts believe that more people will rent in the future due to housing price volatility, impaired credit (due to this economy) and tighter underwriting standards. Add this potential increase in renters to a huge slow down in new construction AND increasing population trends, and you have the perfect storm to benefit your wealth.

In addition to these positive factors, it is my opinion that we will move into a period of inflation (and possible hyperinflation) over the next 12-24 months. The real estate market is currently in a deflationary period, which is providing the great opportunity to buy and rent houses. Once the huge amount of currency that the FED has created begins to circulate, inflation will hit with a vengeance and those cheap houses will start to go up in cost fast. Remember that inflation is the friend of physical assets and the mortal enemy of the cash you have (currency=dollars).
In other words, if you have nothing but cash, you will lose huge real wealth as that cash will buy less and less with each passing day. If you have your wealth parked in physical assets, you should at least maintain your wealth in the worst case, and most likely increase your wealth significantly. The beautiful thing about real estate is that you can buy at today’s low prices and borrow long term at today’s low rates. When inflation hits, you can pay the debt back using the new devalued dollars even though the debt is in old dollars. This makes the debt MUCH easier to repay and improves your cash flow significantly. In other words, if huge inflation hits the US, your income will go up in terms of the currency you are paid with. However, the debt on your investments will remain the same. This allows you to pay your mortgages off very fast and easy using your massive piles of the newly printed (and almost worthless) currency!
On top of all these great economic benefits, investment real estate offers great tax benefits which may lower your income tax bill each year. Today is the day! If you have ever considered investing in real estate, you are living in one of the best times in history to get started.