As our nation's economy continues to sputter along, many people find themselves wondering where to park their cash. Savings accounts are practically paying consumers to take their cash out of the bank and government bonds seem to be closer to default as each day passes by. Large corporations are continously hit hard from the likes of Bernie Madoff and the like. It just seems like an investor has no safe haven to turn these days.
I am here to argue that real estate can be one of the best investments an investor can make. For those that can place a large amount of money down or pay off the home completely, real estate offers a security that few other investments have. People will ALWAYS need a place to live. When you own the keys to a piece of real estate you have an asset that you can always market to others to generate cash flow. Granted there are carrying costs such as HOA fees and property taxes, but with effective property management and rental pricing, you will be able to guarantee a positive return on your investment year in and year out.
Lets take an example of picking up a decent foreclosure in one of Frisco's great neighborhoods, Hidden Cove. This neighborhood has several opportunities priced below $150,000 with two active listings below $110,000 that are virtually move in ready. HOA dues for the year are roughly $390 per year and property taxes last year were just about $3,400. Add in $600 for insurance and $500 for miscellaneous repairs and you can safely plan on annual carrying costs of about $4,900 or so. Recent rent prices in this neighborhood indicate that the owner should be easily able to get $1,000 a month if not $1,100 for rent. That equates out to $12,000 a year in collected rent thereby giving the owner approximately $7,000 in cash flow after paying taxes, insurance, etc. That equals just over 6.3% return on your initial investment if you paid full listing price.
As years pass, inflation will generate increased rental prices and appreciation on your investment home itself. I always recommend real estates as a long term investment when the economy is unstable as it is now. Granted there will be some years where the home will need significant repairs, but good home warranties and insurance policies will help mitigate these costs. Longer leases and fewer tenant turnovers helps to increase profits as well. Last, but not least, if you are not liking the idea of renting to tenants, you can offer someone owner financing where you can demand a higher price off the bat as well as dictate a slightly higher interest rate than what the current market is offering.
Real estate can be one of the safest, best investments you make. Simply take the time to analyze the market, inspect the property, and DO NOT OVER FINANCE the investments. When compared to the uncertainities of other current investments, I think you will be pleased with your choice in real estate!!!