In a Wall Street Journal article (front-page) by Laura Kusisto, May 12, 2015 titled “Home Prices Start to Heat Up” we learn that home prices rose year-over-year in 148 out of 174 metro areas in the United States, as measured in the first quarter of 2015. Fifty-one of these metro areas increased by double digits.
There is no doubt that most U.S. markets, including essentially all the markets real estate investors are investing in, are on an upwards trajectory. (If you are not a real estate investor… you may want to take advantage of as many opportunities as you can to learn about this market and determine what might work for you as an investment in your future.) The reasons are many, including low interest rates and loans becoming even easier to obtain over the past year (and this trend continues). Buyers (no doubt) know that the low rates will not be there forever, and feel compelled to jump in. And they are doing just that. A better employment picture also helps.
Needless to say, the phenomenon of price appreciation by itself can create upwards price pressure, as buyers prefer jumping in sooner rather than later, to get a better price. As I have always discussed and predicted, retiring baby boomers are starting to be a major force in some of the sunbelt states as they seek homes for retirement in warmer climates and friendly tax situations.
For the investor, new and seasoned, what is happening now is not strong enough not to invest. Learning how to take advantage of all of this is optimal at this time. It is a reminder that buying with a fixed-rate 30-year loan that never changes with inflation – and I cannot emphasize that enough – is one of the best financial moves one can make for their financial future! The tenant and inflation will bring the loan balance down as the years go by. Home prices AND rent are NOT fixed, only the mortgage payments are (the loan balance is also fixed and in fact is paid a bit off each month, even nominally due to the amortization).
I will discuss this in greater detail as well as many other factors critical to our real estate investing strategies, during our ICG quarterly 1-Day Expo near SFO airport on Saturday May 30, 2015. We will have market teams from the best markets in the U.S. at the Expo with vendors present for one-on-one discussions. Lenders will tell us about the new loans we can get, including new loans for foreign investors and U.S. investors with over 10 homes. We will also have experts on insurance, credit optimization and repair, and overall financial planning. For more detail on these experts, visit us at ICG Real Estate Investments and click on the button about our upcoming event. To register you may email us at firstname.lastname@example.org, and mention where you saw this blog, to attend for free with two guests. If you would rather register through Eventbrite, feel free (although ticket price applies).
See you soon; I look forward to learning from our experts right along with you.
As a busy professional, it is likely that your income will be sufficient to qualify for loans on investment properties – especially Single Family Homes – in most of the U.S. markets. A high percentage of busy professionals also have good credit scores, which bodes well for getting good financing.
I maintain that the ideal property for real estate investment for the busy professional is the Single Family Home (SFH). SFHs are almost a perfect property for the individual investor who also has a regular job or business. SFHs are still the “American Dream” for most people. They are also a relatively attainable dream in many large metropolitan areas in the U.S. where prices are quite affordable, even in 2016.
SFHs are essentially the “liquid” real estate since when it is time to sell your potential buyer pool is the largest – effectively all home-buyers in the marketplace. These homes are the real estate investment on which you can get the most powerful loan in the real estate universe – the magical fixed-rate, 30-year loan.
Technically this loan is available on 1 to 4 residential units so duplexes, triplexes, and four-plexes also qualify. However, SFHs are usually superior to 2-4 unit properties. In good areas, you will usually find only SFHs, while you may have to travel to another part of town to see the “plexes” and they will usually be surrounded by many other “plexes.” The “plexes” are more likely to present management challenges, have more short-term tenants (statistically) and to top it off, may not necessarily provide as good an appreciation over the long term.
One exception is new duplexes in white-collar areas, but overall the SFHs are superior. I have been buying homes for well over 30 years and helped people buy nearly 10,000 homes in dozens of markets. During these decades, I have witnessed many “plexes” and their performance as well as many thousands of SFHs. My experience and the experiences of thousands of investors leads me to favor the SFHs over the “plexes.”
Buying larger residential properties – apartment complexes – can be a good investment, but there are areas where the investor needs to be an expert. The optimal apartment complex size, based on the experience of most apartment complex investors, is between 100 and 300 (many say 150-300) units, so economies of scale can be utilized to improve cash flow.
This movement plays right into our investment emphasis and is encouraging to see. We will discuss this trend and many more pertinent issues during our 1-Day Expo Saturday, June 14th near the San Francisco Airport (click here to register.) We will have expert lectures on asset preservation, general financial planning and non-recourse IRA loans for houses. Our ICG Real Estate Investors team from the top real estate markets in the nation will be present all day providing learning tools and networking opportunities.
Below is the entire Wall Street Journal article:
In April last year, the couple rented out the condo and moved to Deerfield, a Chicago suburb. Having sold the condo a week ago, they plan to buy a home later this year. They got $14,000 more for the condo than they would have if they had sold earlier, Ms. Dorr said. “It made sense to wait,” she added.
Overall, cities are still growing slightly faster than the suburbs—a historical anomaly after decades of American migration to the burbs. Some of the growth has been fueled by younger Americans and retirees preferring city life, either for lifestyle reasons or to downsize their living arrangements.
Cities in metro areas greater than 1 million people grew at a 1.02% annual rate in 2012-2013, down from 1.13% in 2011-12, according to Mr. Frey’s analysis. Suburban areas, by contrast, grew at a rate of 0.96%, roughly on par with the 0.95% the prior year, Mr. Frey’s analysis shows.
The slowing growth in these urban cores and the increasing gains in the suburbs may be the first indication of a return to more traditional patterns of city-suburban growth,” said Ken Johnson, a demographer at the University of New Hampshire.
Write to Neil Shah at email@example.com