Real Estate Investing

Investing in anything involves timing and risk.  Investing in real estate is no different but the current situation of 2010 offers a great opportunity to invest with a better return on investment (ROI) compared to other investments.  While risk is still present, it has been mitigated due to the housing bubble bursting and for those with cash or available credit, there are opportunities.

Cash is King and Good Credit Works Too

The essential point to investing in real estate in 2010 is that cash is king but that good credit works too.  It is a sad fact for many Americans that the value of houses has plummeted and placed many families into situations where their loan is for more than the house is worth.  Add in unemployment that has been greater than 9 percent for over a year and many sellers are desperate to sell.  Coupled with this are banks that would rather deal with a short sale and lose some money rather than have to foreclose and possibly lose a lot of money.  All of this creates great opportunities for those ready to invest in real estate. 

It is the decline in home and property values that makes real estate such a great opportunity but not exactly in the way most people think.  In the not so recent past the conventional wisdom was that a house could be bought, some improvements made (also called flipping) and then sold for a hefty profit.  The other conventional wisdom was that it was possible to buy the house, live in it for a short period of time and then sell with the market increase and pocket the difference.  Both of those models are far less applicable now but there are other options.  One very profitable option that many investors are using is buying property and renting it out for monthly income.  With a reasonable down payment it is possible to buy rental property and produce a positive cash flow immediately and then ride the value up over time while also increasing the rental amount by a small amount each year.

Timing is Everything

Beyond prices, the other thing that makes 2010 a great opportunity to invest in real estate is the interest rate that banks and loan companies are charging for mortgages.  Current rates are at historic lows and that can make mortgage payments on even moderately priced homes of around $300,000 very reasonable.  Another part of the mortgage equation that makes it a great opportunity for investors is that many people who would have invested with 0, 3 or 5 percent down are now out of the market due to the tightening of credit as a result of the financial meltdown. 

An additional part of the timing that makes 2010 such a great time for investors is the huge inventory that is available to buyers.  With a 9-12 month supply of homes on the market, the savvy has a choice of properties that is unmatched in modern memory.  This means that investors with cash and good credit now have less people to compete against in a market that has plenty of choices.  This is called a buyer’s market for good reason but it is especially an investors market.

Investing in real estate is not for the faint of heart or for people who are risk adverse.  Real estate investors also need to know their market and carefully examine several properties before making the decision that will tie up money and valuable credit.  It is best to have several options to fall back on if a deal fails to work or the buyer is fortunate enough to have more than one investor interested in the property.  Lastly, real estate investing is not about saving anyone else’s credit, it is a business decision and the goal is to make money and increase the value so it can either be leveraged for additional income or capital gain.