Buying investment properties
Investing in real property in the current recession is a difficult decision. Much of the advice and information being given out is based on misinformation . The real question is when to buy investment properties.
The truth is that property values have not reached bottom yet and a decision needs to be made as to whether an investment property is for a quick profit by flipping the home, or as a long-term investment that will provide an income. In many parts of the world, properties prices are more appealing for the buyer interested in long-term income, but not so much for the investor wishing to make a capital gain, especially in the short term.
There is no doubt that house valuations still have a way to change , and the direction is down wards. There may be a few places, especially in the US, where prices have reached bottom, but these will tend to be in markets where there is a huge amount of inventory of repossessed houses.suach as Nevada with huge inventory of REO properties.
Timing is important, when buying investment properties because there are some markets that may never recover, and some markets that have already begun recovery. There are substantial differences between the most boom-fueled markets and those that saw slower, more sustainable growth during the credit boom. Those most likely to recover first are the ones that were least affected by the boom. Those most likely to recover last will be the ones where artificial inflation created massive increases in house prices over the last twenty years or so.
A great deal of effort is being put into re-igniting the housing bubble by the financial institutions aided by the central banks. The British government for example has printed several hundred billion in new money in an effort to prevent a market correction and so far had failed to achieve their goal.
Rising numbers of bank owned properties are still dragging down the market in the USA, and the governmental intervention has done little to stop the flow of property into the banks. There are massive quantities of REO properties in the system that has not yet been placed on the market. This approach of allowing the banks to hold so much property back from the market place must surely backfire, and there must come a time when this stock is released.
Where this will end is anybody’s guess, but currently, investing in properties is a risk, which requires careful consideration before doing so. There is substantial money to be made if the correct market is chosen, and due diligence done before investing. At the other end of the problem are those wishing to sell rental properties in an extremely down market. The value of such properties is difficult to assess with the present low sales volumes, and any median price figures need to be examined closely to determine the level of sales before making a decision.
At the other end of the problem are those wishing to raise financing in an extremely down market. The banks are just not lending and arranging investment property loans is extremely difficult without a strong track record. The value of such properties is difficult to assess with the present low sales volumes, and any median price figures need to be examined closely to determine the level of sales volumes before making a decision.
