Many investors and potential home buyers are talking about the bottom in the housing market. As a potential home buyer myself, I am very excited at the opportunity to purchase a home/condo at a reasonable cost. However, I am not betting on the profit potential that real estate provided in the past years. If you are an investors, here are things to consider:
- Property must be purchased at a deep discount relative to the cost of maintaining. Another word, the potential income/saving (rent or opportunity cost of rent) should equal or exceed the cost of carrying the property (mortgage + tax + maintenance).
- You must have enough liquid income to support the cost for at least 6 months due to the uncertain economic environment.
- Banks are holding large amount of foreclosed homes. This mean "pending supply" is coming to the market once price improve. This is one factor most people over look!
- Expect the homeowner's association fee (HOA) to rise because high foreclosure resulted in less money to the association. The remaining are have to subsidize the lost revenue.
The video below gives a great insight into where we are in the housing market.
Some of the headline news you see may be misleading because properties are specific to the location. Some of the local market here in the bay-area are receiving multiple bids which usually signal a bottoming process. This doesn't mean that profits will return because buyers have more realistic expectations for the return. I highly doubt those bids are comparable to the peak level.
There are advantages in purchasing at this times such as the $8,000 federal tax credit (for those who qualify), shelter from taxes, and inflation hedge.
What separate good from great investors are their abilities to control their emotion. Great investors make decision rationally and not emotionally. So remember to set you emotion aside and think clearly before leveraging up with a mortgage. Housing market is approaching bottom, but probably won't make a "V" shape bottom.
Art
There are advantages in purchasing at this times such as the $8,000 federal tax credit (for those who qualify), shelter from taxes, and inflation hedge.
What separate good from great investors are their abilities to control their emotion. Great investors make decision rationally and not emotionally. So remember to set you emotion aside and think clearly before leveraging up with a mortgage. Housing market is approaching bottom, but probably won't make a "V" shape bottom.
Art
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By knowing your local real estate investing market, you're able to keep your finger on the pulse of your local community and to stay abreast of changes in trends, sales prices and rental rates. Knowing immediately about these changes is critical to your investing future.
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