So the U.S. government has just “compromised” themselves into averting a fiscal disaster by raising the debt ceiling at the eleventh hour…But the stock market ain’t buyin’ it, and either are other major world markets either. A pox on both your houses…as our bi-partisan system of government yet again proves that their sole existence is not for the commonwealth, but rather to simply stay in power.
So what is the small real estate investor to make of it all? Is this the right time to dive in and scoop up those potential property money-makers?
Well, yes…and no. It truly depends upon your time horizon for your property investments. It would appear the current stagnant economy will be staying with us for the foreseeable near-term future, and that means property values will also remain stagnant – at least in the short run. But if your time horizon is medium to long-term (say, three to five years at a minimum), then finding a property that throws off positive cash flow makes absolute sense right now. Real estate values will have had enough time within a few years to better stabilize, and you can look at increased values from overall market increases by then. And in the interim, increasing rents will also help in increasing the market value of your property.
A strong rental market
Most importantly, the rental market will remain strong. And it certainly will when most folks are not considering “trading up” their own homes, more buyers are staying on the sidelines due to fear of losing their jobs, and renting remains a safer short-term option for potential home buyers. So, as an investor, increasing your market rents gradually over the next several years will yield greater valuations on any rental property.
The investment to be wary of in this current economic climate is the fixer-upper that requires a quick turnover to make a profit. Right now, a property investor cannot be assured that the house he buys today and fixes up within a year’s time will still retain it’s value. Nor can you assume the improvements to the property will have sufficiently out-gained the current stagnation in the market, or any real estate deflation that continues to occur in so many local markets around the country.
Your time horizon is the key
So as much as the efforts of our current Congress have averted a disaster, and interest rates (for the time being) remain low, it is still a great time to look for deals on investment properties if your time horizon to hold your investment is at least three years or more out. Great deals can still be had if you can crunch your numbers and be quite satisfied the property will throw off a positive cash flow, or at the very least, a small negative cash flow you can live with until the market rebounds.