A friend of mine recently told me that she spends hours every week, perusing the classifieds and MLS listings, looking for a cheap property. I asked her, "Why?" and she replied that she was looking for a good investment. But is property really a good investment in this economy?
Property is an investment, but not always a good one. For people who bought their homes in 2005 or 2006, they know what a bad investment looks like. So, why would anyone buy a piece of property in this economy, as an "investment"?
1. Buy it and hold it. Eventually, it will be worth more than it is today - right? Maybe. But even if it is worth more, what will the cost of holding the property turn out to be? Taxes, homeowners association fees, utilities, maintenance can all add up to quite a lot of money.
2. Buy it and flip it as is. Investors with ready cash are starting to do this in markets where there are more investors than homes. By the time a purchase goes through and the deed is recorded, a home may increase in price $10,000 to $20,000.
3. Buy it, fix it up, and flip it. This is the old-school way of flipping and one that takes cash, time, and skills. In a market where the price of homes is going up quickly and there aren't enough homes on the market, this is the road to quick and vast cash.
4. Buy it and rent it. If you are only looking for a good return on investment (ROI), this is the way to go for you. Buy a property, do a minimum of work to get it rental-ready, and start collecting the checks every month.
Lesson to be learned - know WHY you are buying a piece of property and WHAT you are going to do with it BEFORE you buy it!