Should I Invest In Real Estate In A Declining Market?
At first glance, I think that most people would answer this question with a big fat NO! The words "invest" and "declining" just don't look all that attractive when paired together in the same sentence. However, as a real estate investment specialist, here are my thoughts when it comes to investing in a declining real estate market:
- Choose the best option available to you on what to do with your money. Everyone's situation is different, but most people would like to see the highest rate of return with the least amount of risk. Here are a few common options:
- Savings Accounts - Most are currently offering less than a 1% interest rate. Some people think this is the safest place to keep money, but it seems risky to me...earning 1% interest on your money doesn't even keep up with inflation!
- Stock Market - There is always a risk that stocks you invest in could one day crash, and financial gurus like Suze Orman says she thinks the market will continue to decline further in 2012.
- Rental Property - Even if the property value declines, you will still continue to have cash flow. The rental market is stronger than ever, with the amount of short sales & foreclosures taking people out of homeownership.
- If you plan to buy real estate in an area where values are likely to decline, here are some things you should consider:
- Find out WHY the values are declining. Will a major local employer go out of business and leave many people out of a job? Is the area a bedroom community where some people will move away from to be closer to the city, due to a possible rise in gas prices? Has the high percentage of foreclosures caused many vacant homes to be a target of squatters or vandals?
- Buy as local as you possibly can. This way, you'll be more familiar with what is going on in the areas that you buy in. You'll have the inside scoop on what attracts people to relocate to your area or how the rental market is doing by the amount of vacancies you see and how long "For Rent" signs stay up. Interviewing several local property managers one-on-one will also make it easier to decide who to hire if you live nearby.
- Think of real estate as a long-term investment. Realize that a long-term commitment to owning rental property is much safer than buying something which you plan to sell in a year or two. Having rentals will continue to pay you monthly "dividends" equal to the current rental market values, which are completely different from property values.
BOB & LEILANI SOUZA
Real Estate Investment Specialists
Southwest Placer County, CA
Bob Souza - 925.513.3400 - bob@souzarealty.com
Leilani Souza - 916.408.5500 - leilani@souzarealty.com
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Bottom line, real estate is always going to be the best long-term investment. It is not a get rich quick scheme. And now is a great time to be buying.