Why should you invest in residential real estate? Because it is an investment unlike any other. In an up cycle market like we’re currently in, investing is talked about a little less, with many potential buyer’s logic being that prices are high and that equates to not being a good time to buy. That logic is good, down cycles in pricing can be a great time to invest but there’s good logic behind investing any time, and trying to time the market isn’t easy. It’s noteworthy that while some would-be investors are on the sideline today based on higher prices, institutional investors are simultaneously acquiring residential real estate at a staggering rate, including thousands of single family homes that in the past were seen as more suited for mom and pop investors.
The basic benefits of investment real estate apply regardless of market timing, starting with the fact that you can use leverage to acquire it. Low, fixed rate mortgages for investment real estate are readily available and relatively easy to get, but of course nobody’s going to give you a 30 year fixed rate loan to buy stock. Next is cash flow, done right, investment real estate should always provide it. There was a time before the financial crisis of the 2000s that a lot of investment real estate was speculative based only on perceived appreciation, we were never proponents of that and it’s not something we are seeing from others in today’s market. The investment should meet a minimum targeted yield based strictly on income and expenses, appreciation and tax benefits are real and a big part of your long term gain, but it starts with cash flow. Sure, purchase prices are high these days, but so are rental rates and therefore getting the cash flow right is attainable.
Of course there are downsides, the risks are real too, and a varying degree of work and personal involvement is required. However in the big picture owning some property just makes sense, it’s a real asset that produces a dividend in the form of rental income and appreciates over time while also reducing principal balance. So, what do we recommend? Invest in residential real estate! We love talking about this stuff and many of the team members own and manage investment properties personally. Reach out for a more detailed chat about it any time!