Investing in property
The decision to get involved in buying investment real estate in the current economic situation is a difficult one. Much of the infomercials being given out is not true.The real question is when to invest in property.
The truth of the matter is that property prices have not reached bottom yet and a decision needs to be made as to whether an investment property is for a quick profit by flipping the home, or as a long-term investment that will provide an income. In many parts of the world, home prices are more appealing for the buyer interested in long-term income, but not so much for the investor wishing to make a capital gain, especially in the short term.
There is no question that real estate values still have a way to change, and the direction is downwards. There may be a few places, especially in the US, where prices have reached bottom, but these will tend to be in markets where there is a huge amount of inventory of repossessed property, like Nevada – massive stock of bank owned properties.
Avital aspect is the timing, because there are some markets that may never recover, and some markets that have already begun recovery. There are substantial differences between the most boom-fueled markets and those that saw slower, more sustainable growth during the credit boom. Those most likely to recover first are the ones that were least affected by the boom. Those most likely to recover last will be the ones where artificial inflation created massive increases in real estate valuations over the last 10 years or so.
A enormous quantity of effort is being put into re-igniting the housing bubble by the governments. Some of them are even in danger of going into default by doing so, but are desperate enough to try even if they do end up going bust. The UK government for example has printed several hundred billion in new money in an effort to prevent a market correction.
Rising numbers of distressed properties are still dragging down the market in the USA, and the governmental intervention has done little to stop the flow of property into the banks. There are massive quantities of REO properties in the system that has not yet been placed on the market. This approach of allowing the banks to hold so much property back from the market place must surely backfire, and there must come a time when this stock is released.
Where this will end is anybody’s guess, but currently, the decision to get involved in buying investment homeswhich requires careful consideration before doing so. There is substantial money to be made if the correct market is chosen, and due diligence done before investing.
At the other end of the problem are those wishing to sell income property in an extremely down market. The value of such properties is difficult to assess with the present low sales volumes, and any median price figures need to be examined closely to determine the level of sales volumes before making a decision.