What is the most crucial factor when it comes to investing in real estate? For many people, the answer is location. However, the truth is that timing is equally important. Choosing a good time to invest in real estate will significantly affect the long-term profitability of your investment. If you buy a house in a great area without considering housing market trends and real estate cycles, your investment could turn out to be a disaster. So, when is the best time to invest in real estate?
ARE YOU INVESTING TO OCCUPY OR RENT OUT?
Investing in real estate could mean buying to occupy it or to rent it out. That may sound like a trivial distinction, but it’s essential in how you think about your purchase and how it’s financed. If you’re buying a property because you plan to live there, consider whether it makes sense to buy rather than rent. Will you be living in the area long-term so that it makes sense to lock up your money in down payment and pay the closing costs and other transaction fees? Many experts suggest that you have to occupy the property for at least seven or eight years to start making sense to buy. If you’re buying to rent out, your considerations are different. It’s about how much money the property can generate. So you need to understand the rental market as well as the expenses of maintaining the property.
LOW MORTGAGE RATES
Mortgage rates are at historic lows, and now some lenders are even offering 30-year mortgages below 3 percent for owner-occupied housing. It’s hard to see such low rates and not reach your checkbook if a house already makes sense for you. Such low rates may make owning a home more affordable than renting one, depending on your circumstances. And with the mortgage likely being the single highest cost for a homebuyer, low rates will drive purchases.
HOMES ARE MORE AFFORDABLE, OR ARE THEY?
Low mortgage rates may make property initially more affordable, but they may also send house prices soaring, negating the effect of low rates. This effect may be compounded by low inventory in some areas, making buyers scramble for what houses do remain available.
Despite the uncertainties created by the economic climate and the coronavirus, real estate may still prove an attractive investment today, in part due to historically low rates. But remember that a lot of the value of investing in real estate comes in the long term, holding property and letting time grow your investment. Investors looking to make a short-term score are often disappointed.
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