If you’ve been considering buying real estate as an
investment, you’re in good company! Existing home sales are up in January for
the third month in a row. One out of every four buyers were investors. The
difference between them and you? They took action!
Still not convinced? Here’s what Warren Buffett recently had
to say about residential real estate: “I think it’s about as attractive an
investment you can make.”[1]
Are you really going to let this incredible opportunity pass
you by while others are building their wealth through real estate?
Just consider these four reasons to buy real estate now—before it’s too late!
Historically Low
Interest Rates
Why are low mortgage rates (below 4%[2]
for 2012) so important? Low interest rates mean lower payments; lower payments
mean more possible cash flow.
Cash flow for a real estate investor is what he or she earns
after paying all the expenses related to the property. For example, if expenses
are $1,000 per month (mortgage payment,
insurance, taxes, repairs, etc.) and rent is $1,500, there’s cash flow of
$500/month ($1,500-$1,000=$500).
For an investor, cash flow means more immediate return on
the original investment, which means a greater return overall because these
funds can be reinvested immediately or saved for future real estate purchases.
Low Prices and Rising
Rents
Along with great challenges come great opportunities, and
this couldn’t be truer in today’s housing market. Due to excess distressed
inventory and more demand on rental housing, prices have plummeted and rents
have soared 24% over the last four years, creating the perfect atmosphere for
investing in real estate.[3]
A Lower Risk
Investment
A long-standing debate has raged over whether
real estate or the stock market is the smartest investment strategy. Building a
portfolio with a mix of different types of investments is always smart, but
what if you have a finite amount of money to invest and still want a high
return without a lot of risk?
To add more perspective, examine the real
estate and stock markets side-to-side over the last decade. Real estate values increased by 19.2 percent between
January 1, 2000[4], and
December 31, 2011. Over the same time period, stocks in the S&P 500 decreased by 14.4 percent. [5]
Even during one of the worst performing real
estate markets for appreciation, real estate is a more reliable, stable
investment than the stock market. And that’s only half the story. Remember cash
flow? Most stocks don’t pay a cash dividend at all. If purchased correctly,
real estate always cash flows.
Appreciation
Appreciation should always be looked at as a bonus in a real
estate investment. Over the last 40 years, real estate appreciation has
averaged 5%[6] per
year (in addition to monthly cash flow)--one of the reasons Buffett called
single-family homes a “very attractive” asset class. Buffett: “If anybody is
thinking about buying a single-family home … it’s a very attractive asset class now.”
Investors in your market are cashing in on the opportunity
now. Why aren’t you?
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