The Perfect Time To Purchase Real Estate?
The current economy is excellent, unemployment is continuing to drop and record highs are being seen by global equities. Most experts agree that 2018 is slated to be a good year in real estate. There are some signs revealing the possibility of a shift in the near future. This would impact not only business in general but the real estate market as well.
The Real Estate Market for Investing
When times become uncertain, it becomes necessary to have a good strategy in place. Although Spring is historically known as the best time to buy a home, it is important for real estate investors to be consistently looking for opportunities presenting a significant value. This strategy has enabled investors to remain prosperous through both good times and times representing a significant challenge.
It’s About the Return on Investment
The real estate market is currently offering both high risks and low returns. Some areas, such as Boston are setting records, while others are still seeing lingering inventory from the real estate bust. When looked at holistically, the current market should provide an average return of 5.5 percent on any properties purchased.
The amount of the profits is dependent on several factors including inflation, taxes, the level of asset risk, the type of property and the purchasing price. The costs of construction have increased, many investors have become cautious, the cap rates have compressed and people are now interested in a safe level of return. There are ways for both investors and individuals interested in purchasing a home to add value to their investment.
Real Estate Recessions
The cycles of recessions have been repeating in intervals of between seven and twelve years since the Great Depression. Financial history almost always repeats itself. If this is true it means the tenth year of the cycle is in full swing. Many economists and analysts believe this means another recession is imminent within the next couple of years. The same signs of overheating observed right before the Great Recession of 2008 are starting to appear.
There have been increases in oil prices and the Federal government is consistently hiking interest rates. This is not necessarily a negative for the property market.
Buying a Home in the Current Climate
A large number of individuals, developers and investors purchased properties or chose to buy a home during or just prior to the last recession. Many of them have enjoyed a nice margin of profit because they sold at just the right time.
It is important to remember that real estate prices can only increase for so long before they will begin dropping. This is an important lesson in the world of purchasing properties.
An excellent example are the new apartments, homes, townhomes and condominiums currently being built throughout the country. These properties are expected to be ready for purchase within the next twelve to eighteen months.
The market is already filled with homes, apartments and condominiums for sale at extremely high prices. One option that has seen positive results is purchasing a beachfront condominium utilizing it as an vacation rental. With the explosion of AirBnB – it is not as challenging as in the past to acquire revenue from short term rentals.
Once the new properties flood the market these prices are expected to decrease dramatically. The challenge is finding value in what is currently available. Many homes for sale that were average are moving into luxury home prices (generally considered over $750,000).
Many people look for assets that are not performing up to their potential. They are lacking the sophisticated marketing and management necessary because they require improvements and an influx of cash.
One of the best possible strategies is for individuals, businesses and experts is to simply add more value to the real estate.
Once you have upgraded the home to sell, the property can be lived in and held for the future or repositioned for the business marketplace to provide a much higher rate of rent or sold for profit. This is a good time to sell a home.
Property can often be purchased fairly cheaply during a recession. The property can be sold as the market value begins increasing for an excellent profit. This strategy also works extremely well when the market is oversaturated with properties. These assets can be held or sold once value has been added to the property.
Investing in Real Estate
Many investors use this strategy because it ensures a continual cash flow. This enables them to purchase good opportunities when they become available. Even if the actual value of the property decreases, profits can be made from the added value or by holding onto the property for a period of time.
This often results in doubling the amount originally invested. Most people believe the profit is made when they sell a property. The profit actually begins the moment the property is purchased. There are a lot of opportunities that will become available in the very near future.
The Federal Reserve is expected to continue raising interest rates throughout 2018 and 2019. This will cause the cap rates to continue to increase leading to a decrease in the price for properties. This is an excellent time to make a purchase. It is important to watch the market closely, look for available opportunities and purchase when the time and property are just right.