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Growth potential in Real Estate investment
Posted by Lorraine Ross on March 27, 2008.specials { border: 8px outset red; };
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The growth potential in the real estate market is a strong one indeed. The growth potential in real estate is much stronger than that of other markets, including mutual funds. Although there may be slight fluctuations in the market, the potential in real estate is high.
If you are careful, the growth potential of a real estate investment can set you up for life. Of course, to do that you must take care to make the right choices in the properties you choose and how you handle the investment after purchase.
It is well known that real estate is the type of investment that grows in leaps and bounds regardless of the economy. It is rare that a depressed economy will affect the growth potential in a real estate investment, though high interest rates on mortgages may have a temporary effect on its growth.
This only happens when the interest rates are high enough to affect the housing market as a whole, causing a slow down in all areas—residential and commercial, thus affecting the investors as well. After all, a real estate investment cannot make money for an investor if he has to pay 20 percent interest on the mortgage without being able to raise the rent to compensate.
On the other hand, when the market is steady, an investor can adjust rents to meet with the growing economy. Most people accept escalating housing costs as part of the economic growth of the country and don’t complain as long as it remains steady. For homeowners, it’s an advantage when housing costs escalate, but for the renter, it can be problematic.
Renters in some cases are paying as much as 40 percent of their income on housing costs, yet landlords are still looking for tenants to earn their rent in one week. If an investor wants to make money in real estate, he must either look toward providing more real estate for the middle-income family or look to investing in property that is geared toward higher income families.
Investing in real estate is a safe and secure venture because everyone needs housing, no matter what the status of the economy may be. Thus, in spite of a depressed economy, an investor does not have to concern himself about the growth potential of his real estate investment.
He or she may find that rents must remain slightly lower to attract new tenants or retain the old ones, but he will not lose money on his investment unless many people lose their jobs in a situation similar to that of the Great Depression. The likelihood of a repeat of that era is rather slim since people have learned from the experience and are insuring their assets.
The growth potential of real estate is a sound one though at times it will be slightly slower than other times. For investors, the growth potential in real estate works in their favor because they have the option of buying real estate to sell at a profit or buying it to rent and hopefully profit by being able to charge higher rent than the mortgage payment.
Great post, the growth in real estate is the only true investment, I can think of.
It’s rare that property ever loses value.
I would agree that Real Estate is a fantastic long term investment. I am not so sure I would say that the economy has no bearing on Real Estate value or growth though. We are in a low interest environment right now but most Real Estate markets around the country are going through a correction. This is certainly due in part to a weaker economy as well as a host of other factors such as over building, high energy costs, and a mortgage market meltdown.
Hi Lorraine,
Just came across the blog, great job. I think it is interesting that you are saying real estate investment is a safe and secure, regardless of the economy. If I was an American, I would definitely take advantage of the low housing costs right now!
Thanks for the great article. I’ve been thinking about buying a few foreclosure properties now that there are some great deals out there.
There’s this cool game called Flip that House Real Estate Cashflow Game.
It teaches you how to purchase property, how to fix them up, and flip them for a fast profit.
For those that haven’t done fliping before, this is a great way to learn about foreclosure investing!
great blog you have, im new to this real estate biz and i found your blog very helpful
i’ll be back for sure
another great post Lorraine
now is the best time to invest in real estate. these low prices are ridiculous. and it will go up for sure in the future.. hopefully..
Investing now might be quite risky, unless you are prepared to wait a few years before reselling. With a huge recession possible, there might be a shortage of buyers on the market for the next several years, at least until the marker bounces back. Too bad none of us can actually predict what is going to happen, all we can do is to make an educated guess…
Great article Lorraine, I sure think now is a good time to invest in the UK property market, they really slumped at the start of the year, down 6% according to some statistis – although I am fairly certain when the official transaction prices come out for Q1 & Q2 it will be more like 10%. That said it seems the general property market is starting to pick up.
real estate is certainly one of the best investments one can make. Houses may lose value, but they are never worth nothing.
Ben Bernanke, president of the Federal Reserve, annonced the end of the Economic Krach the US and the world just went through. It is indeed a great indicator for inverstors or individuals to invest in the real estate industry where pricing are at the lowest .
Thank you Lorraine for this great blog!!
Nice post. I agree with your viewpoint Lorraine. You have to take the long term viewpoint with real estate investment. With property values where they are, its really the perfect time to invest. Whats more, if you are looking at multi-family properties, at the moment rents are soaring. Simple supply and demand created by the subprime mortgage mess.
Graham, I disagree entirely. Plenty of homes are losing value all over the country as a result of the sub-prime meltdown and the realization that the market was superficially inflated to begin with.
It’s only a good investment if you buy at the right time…..just like with stocks and mutual funds.
Great article again Lorraine… if you could please email me back I have a few questions for you.
Straight to the core. Absolutely great point you got.
Just opened my eyes about the real estate investment potential.
You got it, and you got it right!
Awesome work Lorraine!
I agree with the post wonderful information. Typically you won’t lose money on any real estate investment as long as you properly research the market you work in so that you know what to pay. Rarely do you see a seasoned investor lose money on their investment properties.
Here in the UK at present the headline is house prices down 2% in a month. The headline could actually read house prices up 15% in 3 years.
Sure i would like the market to return to the buoyancy not long back as i run a Home Information Pack business.
People need to remember property is a long term investment.
I just ran into a guy at the racquetball courts that had 32 rental properties here in Austin, TX that he bought back in the 80’s. He almost has them all paid off and they are all worth over $200,000 a piece. That doesn’t include the fact that he is getting at least $400-$600 positive cash flow a month on each one. He has a pretty respectable portfolio I would say.
Yeah, i agree with most here, real estate is robably one of the greatest long term investments you can make ATM.
Jamie
Being in the real estate business myself, i have seen plenty of sellers losing their shirts on their property. Thanks to all the media hype it seems like the only people looking to buy are investors with all cash looking to purchase foreclosures. Oh well, sooner or later nobody will want to sell and it will become a seller’s market. It always comes around.
Great post! completely agree – I will always hang on the RE
Its interseting to note that real estate value is market driven, unlike stocks which are management driven when it comes to their real value. Bad management can ruin a company and its stock value. Think about it, a small investment in good real estate from ten years ago is still around making profit, the same investment in Enron is gone.
How to determine the real value of a real estate ?
I have invested in real estate since I was 19 and bought a condo for my brother, sister and I. I thought I was on the road to being a millionaire by the time I hit 30. Unfortunately, the year was 1983 and the market stunk and continued to stink for some time. Nontheless, I have been buying real estate ever since and believe that despite the current market conditions, especially in Phoenix, that real estate is a great investment.
i believe the best investment is to have your own house.. thanks for this blog made me enlightened for some things need to be consider.
It is all about timing and they say buy on bad news sell on good. There is certainly alot of bad news so would indicate the time may be approaching to buy for long term investment.
Just posted an excellent example of how how real estate can appreciate http://tinyurl.com/cvmha5
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