Why it still makes sense to invest in real estate with rising hone prices and decelerating rents

There is no doubt that in certain locations the window of opportunity has closed and in other locations it is in the process of closing. The key word I trust you have already identified is: location. We all know real estate is all about location so being extra prudent in your diligence now is very important. As savvy investors focus on best locations for their investments it is no surprise that changing markets do not startle them. In fact, often there is less competition for the good investments making it more advantages to invest.

Let’s address the Why invest now portion of this question

As many recent surveys have pointed out is that real estate is considered to be the safest investment during the uncertain times that make up the current economy. Many are talking about cashing in their stock market type investments as individual investors have very little control over these investments and they simply are not confident in where the current markets are heading in the midst of this quirky political field that we are in.

I had a recent conversation with an investor who has half her investments in real estate and half in stocks. She has experienced much turmoil in her stocks and they are in an uncomfortable spiral. Meanwhile her real estate investments are all in her control and doing well. As you an imagine, investments in your control is key take away for most investors.

Tangible assets

There is no better feeling of control during uncertain times than having tangible assets. Real estate is most favored as everyone needs a place to live. Gold and precious metals are also an area of increased desire now as they too are tangible investments however it is a tangible asset that does not fulfill a need like housing does and as for control over the investments, these too  lack controls.

Everyone needs a place to live and there is a growing desire to live in a rental home. Home ownership has been decreasing and many of those renting are feeling more comfortable now renting over being strapped to a mortgage. Many contemplate job changes and perhaps re-location in this changing market, so renting is favorable to these concerns.

It makes sense that when the demand for rentals is strong (and investing in real estate provides the most controls for the investor and indeed it is a tangible asset) that investors flock to cash flowing real estate.

But prices are higher

Indeed, prices have gone up over the past few years, which is why savvy investors always follow the best locations for investing. They invest in investor advantage markets within the country where prices are still undervalued, and their local markets are growing. When the whole country is on sale, investors as well as “wanna be” investors are everywhere. As the prices rebound as they have been, you want to look harder to find the good deals. The good news is many “wanna be” investors drop out of the game as they feel they missed the opportunities. This leaves a smaller investor audience and as a result prudent seasoned investor continue to thrive.

It is lonely at the top

I love this saying “It is lonely at the top” Many investors are available to pick the low hanging fruit. Those investments that come easy, they often simply give up and wait for the next buyers cycle to surge. This leaves the best remaining deals to the dedicated investors willing to climb to the top of the tree to pick the best fruit. What is left in these times with less abundant inventory and fewer great markets to invest in, is serious investors who are willing to do the diligence.

Rental Increases are cooling

There is no more exciting time for an investor than a time when rental prices are on the rise. However, as we have witnessed during the past real estate bubble prices cannot rise forever. A market that is increasing is a great thing but increase at a manageable level provides for SUSTAINABLE rents and returns.

SUSTAINABILITY

This is ultimately why investors love real estate, it is sustainable. Find the best locations, do your diligence and look for sustainability over vulnerable unrealistic expectations of getting rich quick.

If you would like some help with this, we do this diligence every day. Give us a call, we are happy to assist in strategizing the best plan of action for your individual wants and needs.

Happy investing!