June 22, 2012

My day in real estate

Today I went to look at a few properties that have gone into foreclosure (HUD homes).  And I put a bid on my first property.  Given that interest rates are so low, and property values have declined significantly, it might be a good opportunity to take advantage of this persistent economic downturn and possibly make a profit.  Just think - interest rates are pretty much at zero percent...it can't get any lower.  Property values have declined between 30% and 50%....chances are that property value won't get any lower.

Perfect time for investing in this asset class.  It's not so easy to find profits in the stock market right now - so most investors are rushing to hard assets like real estate and commodities.

I think investing in real estate now could possibly be a win-win situation, because interest rates WILL gradually go up.  And therefore if I can lock in an interest rate at 4% today...I'd win and the banks lose.  Monthly rental prices are near $750 - $950 in the areas I'm considering.  My mortgage is estimated to be at $270/month after principal, interest, taxes, etc.  This equates to my monthly profit (in this scenario) to be between $470 - $670.  Not too shabby.

I imagine the rental market is going to be in strong demand since there has been a significant transfer of wealth given this past housing market downturn.  A lot of people have lost their homes, damaged their credit, filed for bankruptcy, etc.  Not too many people have questioned why the credit bureaus have raised the bar on FICO scores, however, more people now have bad scores due to the downturn in the economy and the result of this is that people cannot get decent mortgages to purchase a home.  So for now, they rent.  

So therefore, I think that due to this unfortunate event - there might be a silver lining for those of you who have the gusto to take a risk and make a profit.

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