Tuesday, December 14, 2010

Timing the Real Estate Market

I read an interesting article the other day making the case that now was a great time to invest in real estate, and I must say that I agree.  The premise was that real estate had decreased about 30% from the peak in many locations and that the median price had stabilized and started to increase ever so slightly.  More importantly was that interest rates were at the lowest levels we would likely see for several more decades.

Click here to read the full article.

I have recently been considering the question of investing in real estate with a retired relative of mine who will likely require about 20 years worth of income.  Currently, this individual has a fair amount of cash in a savings account.  Needless to say, that savings account does not earn a lot of income and would be pretty useless as an income source to supplement social security and pension income.

Rather than allow those savings to languish and get eaten away by inflation while providing essentially zero return, I suggest investing that cash in income producing real estate.  The cash could be used to pay for the majority of a duplex which has the potential of generating about $1000 per month of spendable income.  Initially, that income could be used to create a fund for repairs for the duplex and pay off any borrowed funds used to complete the purchase.  After a few years, the money could then be used to supplement income or to purchase additional real estate if not needed for living expenses.

I am amazed at the amount of cash sitting on the sidelines in savings and money market accounts that will barely keep pace with inflation if even that.  It seems to make much more sense to at least purchase real estate with cash and enjoy the cash flow from the property.  It really doesn't matter if the property appreciates.  The point is that the income produced is much more than could possibly be gained in this period of low interest rates.  In this case, there is no need for timing the real estate market.  Now is the time. 

Until next time--KEEP IT REAL!

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