With interest rates near record lows, lease prices at record highs, and hot buys that regularly surface in the current real estate market, now is a fantastic time to purchase a piece of investment property for those who are able!
In Houston, the real estate market hasn’t been nearly as affected as in other major cities around the country within the last couple years. On average, home prices have remained fairly constant here in Houston for two to three years during the country’s economic slowdown. If anything, our city has simply not experienced the increase in property values we were used to experiencing prior to 2008. One of the major reasons Houston was negatively impacted at all over the last couple years was due to the squeeze in lending that spread across the country’s financial markets. Even now, borrowing is a luxury left only to the strongest individuals and companies.
What type of investment property should you buy?
Now is a great time to purchase and hold real estate while leasing to both cover the note and make some additional monthly income. Since mortgages are only available to the strongest Buyers, there are more deals available to those qualified, and those not qualified have often been forced to lease resulting in a VERY healthy lease market…and an upswing in lease prices! Don’t get in a hurry though! The best thing you can do is prepare your finances, and wait for the right deal to surface. If you will be obtaining a mortgage to purchase, get prequalified up front so you know exactly what type of down-payment and monthly payment to expect based on the sales price you are considering.
Once the money is in order, wait for the right deal to surface. When purchasing, look for properties that are in good condition or completely remodeled. Unless you are an experienced investor, steer clear of properties that need a lot of repairs. Pay special attention to properties that have frequent price reductions since there are often Seller’s who are in a position where they must sell quickly, and this presents an opportunity for those who are prepared. Look for properties that will lease for a price that is near 1% of the list price. With interest rates near record lows, you can often clear hundreds in profits if your property leases for 1% of what you paid for it. Do NOT move forward with a purchase until you know exactly what similar homes have leased and sold for in the same area within the last year or so, how long it takes on average for homes in the area to lease, and what your total monthly expense will be including taxes and insurance.
Since it doesn’t cost you anything (Buyer’s do not pay real estate commissions in Texas), leverage a professional to help you locate a good investment property. Ideally, find a Realtor who is experienced in your market area, and who has owned investment property before. Make sure they are informed of your price-range and preferences so they can help you keep watch for “hot deals.” Since your Realtor will also help you draw up your offer and run the numbers on each property you are interested in, inform them up front that you are looking for a solid investment and may make a few offers without making a purchase. This will ensure you are both on the same page. Also, be prepared to “pull the trigger” when the right deal does surface!
If you are considering a real estate purchase for investment either now or in the future, feel free to give me a call to discuss your situation. I have purchased many investment properties over the years, from lease properties to flip homes, to lots and raw land. I’ve done extremely well in some cases, and have learned lessons in others, and I would be glad to expose you to the many benefits and liabilities of owning investment property. As long as you have a plan, prepare for bumps in the road, and stick to the plan, you can have a very positive and lucrative experience purchasing real estate for investment!