by MJ Stearns & Marybeth McLaughin
When a recession hits or is about to hit, you know it’s a good time to invest in real estate. Some people are surprised to hear this, but it’s true. It’s because recessions create very motivated home sellers.
Just because it’s a good time to invest in real estate doesn’t mean every opportunity is a safe bet. It’s easy to make bad choices, even in the best investment market.
In this market, it’s important to be able to act fast when a deal comes your way. That’s why you need to develop a relationship with a lender now. You’ll be positioned to swoop in on the best deals.
If you’re buying to rent out, your considerations are different. It’s about how much money the property can generate. So you need to understand the rental market as well as the expenses of maintaining the property. In addition, you’ll likely have to put more money down, often 25 or 30 percent, than if you were an owner-occupier, where 20 percent (or even less) is common.
Mortgage rates are at historic lows, and now some lenders are even offering 30-year mortgages below 3 percent for owner-occupied housing. It’s hard to see such low rates and not reach for your checkbook, if a house already makes sense for you.
Such low rates may make owning a house more affordable than renting one, depending on your circumstances. And with the mortgage likely being the single highest cost for a homebuyer, low rates are definitely going to drive purchases.
Low mortgage rates may make property initially more affordable, but they may also send house prices soaring, negating the effect of low rates. This effect may be compounded by low inventory in some areas, making buyers scramble for what houses do remain available.
Making the choice to start investing in real estate is a big decision, but it’s a decision that has the potential to become a major financial payoff. Figuring out what’s right for you and exploring the different tools that are available at your fingertips are the first steps towards starting your real estate investment journey.
The only way to truly know if today is the right time for you to invest in real estate is to sit down and talk to some experts. While we can tell you that, in general, the Housing market trends are lining up to provide real estate opportunities for some, we can’t tell you if it makes perfect sense for you. Seek out advice from a financial advisor and talk to a mortgage lender if you plan on getting a rental property loan. You can also run through these questions to find out if now is a good time to invest in real estate for you:
How much money do I have saved up for real estate investing?
Am I ready to become a real estate investor and maybe even a landlord ?