Thom Mahan, Realtor/Investment Advisor
Arizona Realty One Group
Reason #1 to Invest During this Real Estate Bust:
Real estate, like all free markets, moves in cycles … it just moves a lot slower than commodities, stocks, bonds and many other types of investments. History shows that real estate booms occur about every 7 to 10 years.
The last downturn in U.S. residential real estate was in the early-to-mid 1990s. That means we were very overdue for the bubble to bust, especially since the Federal Reserve bolstered the real estate market during the dotcom bust and ensuing recession of 2001-2003. By 2005 it was pretty obvious the market was oversold.
Reason #2 to Buy Real Estate Soon:
What else will you invest your money in as we enter 2009? Some experts are saying to buy gold and silver, but those markets are always volatile, offer no leverage and probably have peaked or are close to a peak already.
Stocks may be a good option but with consumers pulling back on spending and job losses looming on the horizon, demand seems to be headed even further down, which will put a squeeze on corporate profits.
Unless you are among the doomsayers who predict global economic disaster is ahead, keeping your money in cash or cash equivalents doesn’t make much sense either.
Reason #3 to Purchase an Income-producing Property:
Rents have increased steadily even as home prices have dropped; this is only logical since people have to live somewhere and if they can’t finance a home they have to rent. So, regardless whether you are a tenant or a landlord, it makes sense to invest in real estate.
Reason #4 to Buy a Home while Prices are Low:
Buy low, sell high … of course. It’s only obvious that real estate values will return; the only question is how soon. There isn’t a huge rush. You can’t time the exact bottom of any market and real estate is no different than any other market in this regard. Wait for signs that money is available again, home sales start to pick up and then you’ll know it’s time to invest.
Reason #5 to get into the Real Estate Market Soon:
We will never see U.S. home prices this low again. As far in the one direction as home prices soared during the boom, the pendulum is swinging even further in the opposite direction now. The reasons are many and complex, having to do with bogus derivatives in the mortgage industry, rapid increases in home foreclosures due to sub prime lending practices and other factors.
But the fact remains that this has created huge opportunities in real estate markets such as Florida, where homes that sold for $300,000 or more just a few years ago can now be bought for $75,000! Where can you find an investment opportunity like that?
Even if you can’t get a home loan right now you could just pay cash in some of the hardest-hit residential real estate markets. And in a year or 2 you can always get a loan, recovering much of the capital you have invested and re-invest it elsewhere.