Investment in real estate
The decision to get involved in buying investment houses in the current financial storm is a difficult one. Much of the advertorial being given out is written to persuade you that the problem is fixed.The real question is when to invest in property.
The simple fact is that house valuations have not reached minimum levels yet and a decision needs to be made as to whether an investment house is for a quick profit by flipping the homes, or as a long-term investment that will provide incomes. In many parts of the world, prices are more appealing for the buyer interested in long-term income, but not so much for the investor wishing to make a instant capital profit, especially in the short term.
There is no doubt that real estate prices still have a way to change, and the direction is downwards. 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 bank owned property, like Nevada - massive stock of bank owned properties.
Aimportant aspect is the timing, 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 real estate values over the last 20 years or so.
A great deal of effort is being put into pumping up 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.
US foreclosures are still rising, despite good efforts by the government and central bank. But the enormous quantity of distressed property continues to rise, and more Americans lose their homes every day. The fact that they cannot afford them points to some serious mistakes having been made at governmental level by encouraging runaway lending to un credit worthy individuals.
Where this will end is anybody’s guess, but currently, investing in property 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 investment 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.
