There is a chinese saying, “May you live in interesting times”. Well, we are in interesting times. The stock market after a significant rise, looks like it may fall and crash. Interest rates are at their lowest in decades, but talk is they will go up shortly. The real estate market has rebounded, but there are still a number of foreclosures and power of sale, properties in the market place. The Canadian, USA and International economy appears to be slowing. So, a few of my friends and clients are asking, is NOW a good time to be buying real estate? The short answer…. YES!
If the real estate market is something you are considering here are a few reasons, you should act immediately:
- Interest rates are low. Therefore, it will cost you less to buy property now than in the future.
- The dollar is devaluating.That means if you borrow money today, when you pay it back, it will be less money (less value in todays dollars). Smart!
- It is still a buyers market.Yes prices have increased, but they are still below historical highs. And there is still an up side to the market. Therefore appreciation and growth.
- Seller Financing and creative deals are easier.Due to a buyers market, you often can structure the deal with some sort of seller or creative financing. The result, is that you can do low down, no money down, or creative financing more now, than ever.
- Properties are cash flowing. Rentals or lease with option to buy (my favourite), you can get 12, 15, even 20 percent rates of return on investments. Rents are greater than mortgage payments at the moment. In particular with the lower interest rates.
Now is great time to either own your own home, or investment real estate. Great rates, outstanding opportunities, and potential of appreciation (growth). No is the time. If you considering buying real estate and getting in the game, here are a few beginning steps:
- Set a goal.For example you might consider one or more of these goals and objectives.
- I will buy my own home with in the next 6 months.
- In 90 days I will purchase an investment property.
- I will buy 1 investment property per year, for 10 years, and should be a millionaire in year 15 (with cash flow and appreciation).
- Look outside the box. Do not use agents, and brokers. Most agents deal with retail prices. Buy wholesale and look at the hidden market. Consider.
- Craigs List. Many folks will sell property on craigs list. Look for real estate for sale. You will find investors on this site too.
- Drive neighborhoods and talk to FSBO. For Sale By Owner. What ever deal you strike with an owner, is the deal. Yes. You need a strong contract. But you can get a great deal with owners.
- Call those signs. The ones that say “for sale or investment deal”. These are normally investors, who like to pass on equity others.
- Go visit property.Visit property just to get use to the process. Take a clip board, or note pad, and ask questions. This will let you know, what you know and do not know, about property, and what questions to ask. Start with these questions:
- What is the purchase price?
- How did you come up with that price?
- Tell me a little bit about the property? Bedrooms? Pool? Baths?
- What problems have you had with the property? Pool leak? Rook leak? Hot water? Air conditioning issues?
- Is there a mortgage or free and clear?
- How much is left on the mortgage or original mortgage amount?
- What is the community like?
- Get an agent for MLS listing.The best deals are done without an agent, but agents, still have access to thousands of houses for sale. Make sure you tell them you are looking for: handy man special, investment real estate, a foreclosure (power of sale), or discount.
- Buy or find a good contract.If you use an agent, they will use a standard broker contract, but if you are buying with an existing owner, you need a contract. Now do not buy the cheap, contract at the office store or on line. Get a real estate lawyer, or solid investor contract. One that protects you.
- Use an addendum. An addendum to the contract allows you to protect yourself, and or negotiate items. You can include things you want in the contracts. For example. I could have in the addendum:
- Subject to partners approval. This means if my partner says no, I do not have to fulfill the obligations of the contract.
- All the items in the garage will be included in the property purchase to include: snow blower, tools, generator, lawn mover. (this allows you to negotiation some items, you will need)
- Negotiate. Negotiation is a skill. Nothing wrong with asking for things to be included in the deal. Generally, if it is screwed or glued, it part of the real estate deal, but everything else is negotiable. Ask for: the TV, garage items, furniture, or whatever you want included in the deal. What is the worst they can say? No?
- Use creative strategies to negotiate the deal. There are dozens of creative finance strategies in real estate. Here are few to get started:
- Lease with option to buy. Rent the property, with the option to buy the property in the future. Usually there some sort of option fee to get into this deal (3-7%), and an additional monthly payment that goes toward the down payment in the future. Example. The rent is $1600 a month, and you pay $2000, a month, $400 goes toward the down payment in the future. The price of the property is negotiable. Today price or the future price.
- Seller financing. Many properties are free and clear. That means what ever you and the sell negotiate as a price and terms, is the DEAL.
Real Estate is a great diversification for your overall portfolio. Whether you are buying a personal house to live in or an investment property. Real estate is an outstanding asset. If fact, when most people retire, their home is usually one of the best assets (with growth). Just imagine if you had 2, 4, or 10 properties? Life might be financially easier. Get started today.