With all the market toumoil, prices crashing, tight money supplies, is it a good time to invest?
Yes AND No.
Why both answers? It all depends on your expected outcome.
But if you are purchasing discounted properties for a quick turn at below market rates or purchasing for cash flow AND the cash flow works, it can be a very good time to buy additional properties for your portfolio.
The simple fact is that no matter what the market is doing… appreciating prices, flat prices or declining prices, real estate investors are making money. But not every real estate investor understands every market enough to always profit from it.
The true key to success in investing is to be sure each deal works now and for any forseeable future trend. Many times that means passing up on many seemingly good deals where the projected cash flow is perhaps break even or slightly negative or where the holding costs during rehab are cutting it close to the edge.
We are currently in a time when end buyers have many choices in housing. In some areas, the inventory levels are stated in years rather than months. That means that if you as an investor are buying a property at retail in that market, there really needs to be a strong and convincing business plan to justify that purchase. Something like the property being in a prime location where some small renovations will deliver proven cash benefits to you. If not, you should not be looking at that deal.
Another thing to consider in your investing right now is migration demographics. For instance, there are many, many houses in the rust belt sitting empty with no buyers even at 90% off the last sale price. While buying a house for $10,000 or less in these areas may seem a great bargain, there are two reasons they may not be. The first is that the property tax charged on the property may not reset to the lower price so you may be stuck paying property tax on a value of $100,000 for that bargain house - and in some areas that can be quite a bill. The second reason is that the migration demographic suggests that people are leaving these areas. Declining populatins means less demand for housing - both for purchasers and renters. If you have a declining market, that bargain property could sit empty - with no takers to either purchase it or rent it.
Untimately the key is to really understand the market you are investing in - and that includes future trends in terms of projected job growth, population growth, the tax situation and the insurance situation. If one or more of these factors in your are are not positive, you need to do that much more homework before jumping into a deal.
To sum up… the deal is the thing. If all the parameters work on the deal, it will work in that market. If all the parameters do not work, you could be investing in trouble no matter how good the deal seems.
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