A few people get in at the bottom of a market. Some of it is luck and some of it is skill. Some people see opportunities where others don’t and they take them. Some people bought gold in the year 2000 at under $300 per ounce when most others were not interested. You could even say the same thing about stocks in 2009 after they had crashed down.
I believe the housing market presents a real opportunity for some people right now. Investing in real estate isn’t for everyone, but I believe there are too many people who are not taking advantage of the current situation of low interest rates and low prices.
Housing in some parts of the U.S. is down by 50% or more from the peak about 6 years ago. I find it funny when someone says that you would be a fool to buy housing now when there are still a lot of bank-owned properties and prices could go down more. I will only listen to someone saying this if he was saying the same thing 6 or 7 years ago. In fact, if someone is a fool now for buying a house, that means someone who bought 6 years ago was twice the fool, so the person saying this should have been saying it vociferously back then.
I believe the housing market in some areas right now is presenting a real opportunity. With that said, I think you need some saved money to seize the opportunity. If you barely have any money to your name, it will be hard for you to get a loan. You also need a bit of a cushion for anything that may go wrong and for the time it takes you to get it rented (assuming investment real estate).
Some people object because they don’t want to be a landlord. This is understandable, but it is also one of the reasons it presents an opportunity, because others are thinking the same. However, it is easy today to find a management company that will manage your property for a fee of around 10% per month of the rent.
Another objection, particularly by libertarians, is that there is an uncertainty about property taxes. While there are no guarantees, it is unlikely you will see property taxes go up dramatically right now in most areas when people are being squeezed. Local governments are being forced to cut back, unlike the federal government. As long as your location is not already highly taxed, like New York City or Los Angeles, then I don’t think this needs to be a big concern.
Again, the main barrier is money. If you have a good down payment of about 25%, money for closing costs, and some more for a cushion, then you are in good shape to look.
The one thing I would warn about is old houses and old condos. You don’t want a big assessment with a condo. You also don’t want major repairs with an old house. It is preferable to buy something newer.
Run the numbers in your area. Assume you can get a loan for the full price, even though you won’t. Then add in taxes, insurance, and association fees. Can you still get positive cash flow each month? If so, then you probably have a good deal. If you then put 25% down, then your cash flow will be that much better.
There are a lot of factors to consider, but I believe that investing in residential real estate is a great opportunity in many areas of the country right now. If you have the money, you should consider it.