4 Reasons to Buy Real Estate Now

4 Reasons to Buy Real Estate Now

(Before it’s too late!)

If you’ve been considering buying real estate as an investment, you’re in good company! Existing home sales are up in January for the third month in a row. One out of every four buyers were investors. The difference between them and you? They took action!

Still not convinced? Here’s what Warren Buffett recently had to say about residential real estate: “I think it’s about as attractive an investment you can make.”[1]

Are you really going to let this incredible opportunity pass you by while others are building their wealth through real estate?

Just consider these four reasons to buy real estate now—before it’s too late!

Historically Low Interest Rates

Why are low mortgage rates (below 4%[2] for 2012) so important? Low interest rates mean lower payments; lower payments mean more possible cash flow.

Cash flow for a real estate investor is what he or she earns after paying all the expenses related to the property. For example, if expenses are $1,000 per month  (mortgage payment, insurance, taxes, repairs, etc.) and rent is $1,500, there’s cash flow of $500/month ($1,500-$1,000=$500).

For an investor, cash flow means more immediate return on the original investment, which means a greater return overall because these funds can be reinvested immediately or saved for future real estate purchases.

Low Prices and Rising Rents

Along with great challenges come great opportunities, and this couldn’t be truer in today’s housing market. Due to excess distressed inventory and more demand on rental housing, prices have plummeted and rents have soared 24% over the last four years, creating the perfect atmosphere for investing in real estate.[3]

A Lower Risk Investment

A long-standing debate has raged over whether real estate or the stock market is the smartest investment strategy. Building a portfolio with a mix of different types of investments is always smart, but what if you have a finite amount of money to invest and still want a high return without a lot of risk?

To add more perspective, examine the real estate and stock markets side-to-side over the last decade. Real estate values increased by 19.2 percent between January 1, 2000[4], and December 31, 2011. Over the same time period, stocks in the S&P 500 decreased by 14.4 percent. [5]

Even during one of the worst performing real estate markets for appreciation, real estate is a more reliable, stable investment than the stock market. And that’s only half the story. Remember cash flow? Most stocks don’t pay a cash dividend at all. If purchased correctly, real estate always cash flows.

Appreciation

Appreciation should always be looked at as a bonus in a real estate investment. Over the last 40 years, real estate appreciation has averaged 5%[6] per year (in addition to monthly cash flow)--one of the reasons Buffett called single-family homes a “very attractive” asset class. Buffett: “If anybody is thinking about buying a single-family home … it’s a very attractive asset class now.”

Investors in your market are cashing in on the opportunity now. Why aren’t you?