Is it a Good Time to Invest in a Rental?

If you’ve been watching the housing market’s long-term slump, you’ve probably wondered if it’s time to pick up an investment property. Here are the things you need to check before you make that commitment:

1. Your finances are solid and your emergency fund is in place. You have cash on hand to cover unexpected repairs. You’re either paying cash for the property or your credit is sound enough to get a good loan.

2. The overall economic picture is stagnant or improving. If you wait for the big turnaround, you’ll be too late. Beware of trying to catch the very bottom; it can’t be seen until it’s passed.

3. The local economy is strong. Keep in mind that all real estate is local. Some markets have turned around and others are beginning to turn around; these are the best places to begin your search. Make sure you understand where the economic growth comes from, and what will make it continue.

4. The rental market is good. When “for rent” signs disappear in a matter of days and landlords keep raising their rents, you’ve found a great prospect.

5. The cash flow looks wonderful. If that bargain foreclosure can be put in shape quickly and cheaply and your mortgage payments are covered by the rent, you have an ideal situation. If not, figure out how long it will be before you achieve positive cash flow. Be sure you can identify the catalysts that will keep your property value appreciating while you wait.

6. The property has location, location, location. The schools are good, transportation is accessible, and there are no big negatives.

7. The property is structurally sound. Look past dated appliances and dirty carpet. But if the house has major foundation cracks or termites, take a pass.

8. Make sure you’re ready for the commitment. A rental property can be a profitable investment, especially when a down economy creates lots of bargains. If you enjoy fixing up houses and can handle the occasional emergency call, being a landlord is for you. But owning rental property isn’t for everyone, and it isn’t a good deal everywhere. Make sure you understand the market and can meet the challenges before signing those papers.

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Should I Buy A Home Now?

The Zillow Home Value Index fell 26% since its peak in June 2006. That’s a greater decline than seen in the Depression-era years of 1928 to 1933.
According to Zillow.com, “November marked the 53rd consecutive month of home value declines, with the Zillow Home Value Index (ZHVI) falling 0.8% from October to November, and falling 5.1% year-over-year.”
But the news isn’t all bad. If you’ve gathered around the office water cooler to catch up with colleagues, maybe you’ve noticed a bit of optimism blossoming. It’s not just a feeling, it’s real. According to Zillow Research, the economy is improving. The improvement is expected to gradually increase “household formation and consumer confidence”. But the housing market may still face greater declines due to “excess inventory of homes, high negative equity and foreclosure rates, and weakened demand due to elevated unemployment,” reported Zillow.com.
However, if you’ve been watching, waiting, and wondering, when to buy …. now’s the time to take note. While no one has a crystal ball to predict what will happen with the housing market, some experts are reporting that an uptrend will occur later this year. They’re basing their beliefs on the job market (some predictions indicate it will improve half-way through this year), and “Homebuilder exchange traded funds are above their 200-day moving averages,” according to ETFTrends.com
If all these things have you confused, a simple way to look at real estate is to understand your specific needs, wants, and long-term goals. Do you need a place to live? Are you planning to stay in your home for at least a couple of years? (Most buyers live in their home on average seven years). Does owning your home matter? Have you saved money for a down payment?
Answering these questions will help point you in the right direction. Assuming that buying a home is the best scenario for you, how can you rest easy that you’re getting the best price? Ah, the $64-million question. You can’t.
Timing the market is like trying to win the lottery. There is no absolute way to know when it’s the bottom of the real estate market. That’s why you must know your specific needs, wants, and long-term goals.
If your needs include a home to live in for a lengthy period of time, then homeownership will likely rank higher on your priority list. If building credit, potential of appreciation–yes, there is still appreciation–especially when you buy a sensibly priced home in a good location. However, the appreciation may be slower and not shoot up into the double digits that we saw in some areas.
Consider this, with high inventory, sellers are motivated. You can scoop up a home at a perfect price and you can minimize your potential for low appreciation. If you choose a home that is in the lower-tier of prices (and still within your target price), your home will be less vulnerable in down markets and better situated in up markets because the higher-priced homes help elevate your home’s value.
Homeownership has many benefits including tax deductions, the opportunity to make your own creative changes to your home, and the potential for income if you later rent it out.

5 Ways to Make Real Estate Affordable

With rents rising rapidly, the appeal of leasing is waning. Meanwhile, ultra-low interest rates and deeply discounted properties make buying an appealing option. Here are some ways you can buy property, even if your income is low or your credit isn’t perfect.

Consider a duplex or triplex.
Duplexes usually cost less per square foot than single-family homes, and the rent from the extra unit can make monthly payments very affordable. You’ll also be able to write off all sorts of expenses. This solution is great for those with good credit and plenty of cash, but relatively low incomes.

Buy with family.
Compatible family members can buy property together. An in-law arrangement may be ideal, allowing mom and dad to help the kids and get assistance with daily living in return. Be sure to consider all contingencies. What happens if one of the couples divorces?

Buy with friends.
If you have trustworthy friends, buying a house together can work well. Banks are more willing to loan with more responsible parties, even if no one has stellar credit. Once you’ve considered location, put privacy and soundproofing considerations at the top of your list. The more privacy shared homeowners have, the more likely the arrangement will be amicable. Separate entrances, double kitchens, and lots of bathrooms are ideal. Consider what happens if the arrangement doesn’t work. Have a lawyer draw up an agreement to cover all contingencies.

Get a cosigner.
If you’re recovering from financial disaster, buying real estate may be as easy as finding a willing cosigner with great credit. Keep in mind, however, that failing to live up to your obligation can destroy a relationship.

Take in a boarder.
If you can qualify for a loan but are worried about the payments, renting out a room or two may make all the difference. Careful screening is essential, and the ideal boarder might be a trusted friend or relative.

Consider all of these options before giving up your dreams of owning real estate. Any one of them may provide just the extra help you need to become a homeowner.