Whether you were once a real estate investor in the early 2000s or not, you have undoubtedly heard of or even had an experience with the US home foreclosure crisis that peaked in 2008. You may wonder why, after that crisis, anyone would invest in real estate in 2015. The truth is that real estate investing is still alive and well, and you can actually make good money doing it as long as you learn from the mistakes made by homeowners and investors that led to to the crisis. Read on to learn why investing in real estate is safe today and how to choose the strategy that will help you make the most money in your area.
Investing in Real Estate then Vs Now
As you may already know, there were many factors that led to the US home foreclosure crisis of 2008. Money and investing experts all have different opinions on what factor contributed to the crisis the most, but they do all agree that mistakes were made not only by home-buyers, but also by banks and other lenders. However, most experts agree that adjustable-rate mortgages played a large role in many home foreclosures. When home-buyers and real estate investors obtained these loans, the interest rates were low due to the great economy at the time. Then, with the general downturn in the economy in 2008, the interest rates adjusted, and they were suddenly much higher and led to mortgage payments rising steeply.
As you can imagine, many people were hopeful that interest rates would never rise steeply on their adjustable-rate mortgages, even though they may have known it was possible. Suddenly, they were stuck with mortgage payments they just could not afford and got behind enough on payments that they eventually had to foreclose on their homes. The home foreclosure crisis hit families and investors who kept their purchases to rent out much harder than "flip and sell" investors, because adjustable-rate mortgages are available with rates that are at first "fixed" for several years. That gave investors who fix up and flip properties plenty of time to fix up a property and sell it before interest rates rose. Families who purchased these homes to live in and investors who held onto properties to rent, as you would expect, hung onto their homes long after these initial "fixed" periods ended and interest rates sky-rocketed.
Today, the actions of banks and lenders that led to this crisis have been strictly regulated to ensure they don't make the mistake they made, such as offering subprime lending to people who were under-qualified financially to obtain it. Seasoned investors have also learned from any mistakes they made before or during the crisis and now ensure they take steps to avoid losing money on investments again.
How to Choose the Right Investment Strategy for Your Area
First, it is important to decide whether you would like to purchase your first property to hold onto and rent out or to "fix and flip." While both are viable options, your local home market determines which is currently advised by investment professionals in your area. You can always invest in both types of properties, but it is a good idea to start with purchasing one property for one purpose to gain some experience with the entire real estate investing process.
Home sales are projected to increase in the US during the next two years, which means fix and flip projects do hold promise as good investments for the next year. However, there has been a surge in US renters since the foreclosure crisis, since home loans are no longer being handed out to anyone and everyone, which is what led to the crisis in the beginning, and homeowners who did suffer foreclosures now have tarnished credit and may generally be avoiding another home investment after their last did not end well.
So, since both types of investments hold promise, how do you choose? First, if you are considering investing in a rental property, look at the rental market in your area. Peruse the online housing ads as if you were a renter, and see if vacancies are hard to find or if there are many homes listed as "for rent" that have no apparent reason they are empty. If there is no current saturation of rental properties in your area that are staying empty, then investing in one is likely a great idea.
If you would rather fix and flip a property, then instead look into the homes for sale in your area using the same criteria as you would when looking for rental vacancies. You can also find websites that list local home sales and how much they were sold for. This information will also help you determine how much you can expect to sell a home once it is fully repaired in in great condition, which is important when deciding how much you are willing to invest in a fix-and-flip property and whether it is a worthwhile investment.
If you are looking into investing in real estate, then don't let the home foreclosure crisis that occurred many years ago keep you from investing in property now. Investors can make and are making good income today that you could be making, too. For more information, contact a company that specializes in real estate investments.