There has not been a time in recent years when there is virtually an unlimited potential existing with realestate investments at this time .  The prices for properties are at lows we have not seen for more than a decade.  In the next 3 to 5 years we can anticipate a great return will be made on real estate that is purchased during this window of opportunity.

Real estate has recovered from economic downturns and each time the values of properties continued to reach new highs.  This does not mean that we adopt a “bubble” approach to our investing strategy.  What we need to do is stay on track with our strategies on strong investing principles and use the laws of supply and demand when it comes to housing construction.

At the present time, building permits are way down simply because of the available housing inventory.  However, during the past year, the housing inventory has been tightening and in some areas of the land, construction developers are now again buying land at low prices in anticipation of a rebounding market.  Even rehab hard money is on the upswing as investors acquire REO properties, freshen up them and sell them for profit or create monthly cash flow from rental income as well as long term appreciation of the property itself .  This is not laborious to understand because, when we consider the fact that the available housing inventory now stands at about 11 months meaning that it would be altogether low within that timeframe if there were no new construction.  Once the housing inventory reaches approximate 6 to 7 months, the market has changed from a buyers market to a sellers market.  Once the housing inventory is less than 6 months, it is considered a very tight market and the pricing of homes starts to increase dramatically.

What fuels the demand for housing ?  Let’s consider the fundamental principle.  New homebuyers first come to mind, because the new homebuyer will be people who are starting a family and prefer not to live in apartments.  Therefore, we anticipate home buyers will be creating a lot of demand in the next 12 months while prices remain low.  Next, immigrants are acquiring housing at unprecedented rates and foreign investors have begun buying up housing, including failed developments in some of the most prestigous housing developments during the past few years and let’s not forget what Will Rogers said about real estate-They ain’t making anymore .  

Investors can expect that new loan guidelines will be developed and programs will develop as the market conditions rebound.  Banks who have avoided investors will come back into the mix and again extend programs for investors to finance and refinance property.  Until then, the investors are using primarily private hard money lenders to help them acquire property.  So, once the market has strengthened sufficiently , the investor will be able to utilize hard money to acquire property and again use traditional bank financing to refinance cash out and to facilitate long term strategies such as buy and hold enabling an investor to take in long term appreciation, tax advantages including depreciation, and a more diverse investing strategy.  All of this is good for the economy because it stimulates the demand for housing including new construction and the unveiling of jobs in the construction, finance, and related industries.  Housing is the keystone of the economy and for a full recovery to occur, the banks and financial institutions will have to get squarely behind financing housing and making loans available to consumers who need them .

Filed under: Finance • Other Loans

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