Are Things Looking Up? The demand from real estate investors has certainly slowed down. This means that you won't have as much competition for properties as you had last year at this time. Vacancy rates are down. This means that you will have an easier time finding tenants this year. Interest rates are down. This means that you will be able to finance your acquisitions at a lower interest rate. Of course, financing is harder to get because of the sub-prime debacle. Still, if you have good credit and a respectable down payment there are a slew of lenders eager for your business. In all, now is a much better environment for real estate investments than we've seen for some time.
A Conservative Approach is Best. My real estate investment philosophy is the same as my stock market investing philosophy. Look for cash flow. No one can predict the direction of market prices. Although we want an environment where prices can increase, we never know for sure when that will happen. If we buy when prices are lower, rents, are higher, and financing costs are lower, we have a better chance of achieving a positive cash flow. This allows us to tolerate price dips and choose a time to sell when we can obtain the best return on our investment.
So Is It Time To Buy? One factor I always look at is the inventory or properties for sale. At the beginning of 2007, we had 18109 Single family houses on the market. This year we have 18709. At the current rate of sales, the present supply would be expected to last 5.8 months vs. 5.5 last year. This means that supply/demand factors are a little worse this year than last but not by much. In contrast to other cities, the Denver market isn't getting much worse.
Let's Look at the Condo/Townhouse Market. Currently we have 5894 properties on the market or a 6.43 month supply. Last year at this time we had 6425 properties on the market or a 7 month supply. It appears that the supply/demand balance is improving slightly. These figures would indicate that, while we are not out of the woods yet, this market is improving. Potential investors in this market should look for well-located units with an established home owners association. I have always thought that the demand for single-level units was increasing faster than the supply so this is the area that I would emphasize in my search for strong investments.
We'll Keep Watching. We believe that the real estate investing environment is the best it has been for some time. We will keep watching. In 1991, the signals for a bull market in real estate were clear and aggressive investors made a bundle. We don't intend to miss it this time.
No comments:
Post a Comment