Top Ten Reasons to be Glad the Economy Sucks
Hello again fellow investor!
I like to stay productive by listening to audiobooks and podcasts while I workout or go for a run, and I just listened to a great episode of the Real Estate Guys Radio podcast. If you are not familiar with these guys, I highly recommend their show for picking up some very current real estate investing tips. I want to share this last one with you…
The episode is called “The Top Ten Reasons to be Glad the Economy Sucks” so you know I loved it! Russell Greg and Bob Helms are the co-hosts of the show, and here is what they had to say about our sucky economy:
1. Great Real Estate is on Sale
Home prices are cyclical, and right now we’re in the trough. Properties are really priced well today, and it’s a great time to start buying. It is so much easier to find a great deal these days than it was in the past. A significant portion of the downside risk is now gone; there is a long term need for real estate, so if you’re smart about it, great real estate is now on sale.
2. Interest Rates are Great
It’s hard to find a period of time in our lifetime when interest rates were as low as they are now. A lot of people are saying that interest rates are going to start edging up in the near future, so it would be smart to buy now. It’s easier to cash flow in a market like this with lower interest rates, so take advantage of the great rates while they last!
3. It’s a Great Time to Become a Private Investor
There are great opportunities today for you to lend money, not borrow it. People have a need to borrow and can’t go to conventional sources as liberally as they used to be able to. People who can’t fit into these new strict lending criteria will be willing to pay a premium over the going rate. This could be a very good time to come in as a private lender and get a 7-8% (or even MUCH more) yield on your money, backed up by real estate.
4. Now is a Great Time to Get a Contractor
Due to fewer construction projects out there, contractors are more likely to call you back and show up on time these days. If you don’t have the capital to purchase more property, now is a great time to fix up the properties you do have; you can then raise the rent and get better tenants.
5. Title, Escrow, and Real Estate Companies Need Your Business
Everybody in this particular sector is looking for work, so you’ll be able to move quickly, get things done, and get great productivity out of your team without having to pay top dollar.
6. Affordability
In the past, less than 20% of people who live in the United States could afford to purchase a home. Affordability is defined as someone making a median income being able to put 30% of their total household income toward their total housing expenses, when purchasing a home at the median price range. This number varies from area to area, but a recent study says that over 60% of all houses sold in the last few months of 2008 were considered affordable, up from 46.6% at the end of 2007.
7. New Housing Starts are at an All Time Low
This is a good thing because of supply and demand – if you have less inventory coming into the marketplace to compete with the current supply, the existing inventory will become more valuable. Last year, the annualized pace of new home starts was the lowest since 1963. Builders need to get rid of the inventory they’re sitting on, so this is a great time to start buying as long as the properties cash flow while you’re holding them.
8. The Repeal of the Four Property Limit
Fannie Mae and Freddie Mac have repealed their four-property limit per person and will no longer refuse to finance investor mortgages where the borrower already owns four investment properties with mortgages. This means that successful, savvy investors can again have more than four properties with mortgages.
9. It’s a Great Time to Buy a Car
Well, the podcast wasn’t all about real estate. Those guys know how to spot any good bargain! And they made a good point: if you’re a buyer today, sellers are willing to deal, especially if you have cash. Cash is king! It’s also a great time to buy furnishings for rentals, which will then generally rent for more and to a better tenant. Everything is on sale these days.
10. Can Get Loans Modified Like Never Before
These days, you can get your loans modified much easier than in the past, whether it be because you’re having a hard time paying the bills, you lost your job, or for any number of reasons. It’s more likely that they’ll work with you and help you figure something out, while it would have been unthinkable two years ago. Getting people current with their mortgages is probably the most important thing that can happen to bring confidence back to the marketplace and help get the economy stabilized.
This podcast was almost an hour long, so the Real Estate Guys covered a ton more information than what I could give you here. I think it would really benefit you to listen to it for yourself, so go check it out at www.RealEstateGuysRadio.com!
Until next time, happy (and profitable) investing!
Doug Smith
