Should you buy now? Is it a Sellers market?April 17,2022First of all, I do not know you, your objectives, or your financial situation, and I am just a guy that loves real estate and writes about it
Should you buy now? Is it a Sellers market?
Dated: April 17 2022
Should you buy now? Is it a Sellers market?
First of all, I do not know you, your objectives, or your financial situation, and I am just a guy that loves real estate and writes about it regularly, so this is not financial advice. But today I want to address the question I get asked often: “Should I buy now or wait?”. I am going to answer this question right here in the first paragraph. But I have lots to say about this topic so please read thoroughly. All indications are that this is a good time to buy. But read on.
Mortgage Loan Interest rates are now as hovering around 5 1/4%. A year ago they were two points less. To borrow $300,000 today will cost you 350 dollars per month more than it would have a year ago. Housing is appreciating. Rents are going up accordingly. Interest rates will go much higher. And inflation will be unbridled in the near-term future. If you buy now, your interest rates will be lower than a year from now and prices will be lower than a year from now. If you have cash, it will be worth less tomorrow, and much less next year.
A short update on me: Last year Gail and I spent six months building an addition to our vacation rental home on the Nottely River in Murphy, NC. While we were there, I decided to slow down as I approached my 68th birthday. I took time off from writing my weekly column and spent time immersing myself in the cryptocurrency market that I entered in February of 2020and working with my real estate clients that approach me. I no longer prospected for new real estate brokerage business. I spent more time coaching and mentoring. I have done well in both real estate and Crypto. Real Estate is my main exit strategy for my profits in Crypto. I'm hunting for vacation rental homes to buy as we speak. But in fact, I never stopped hunting.
Back to real estate, it is true, that when you run the numbers on many real estate investments, including vacation rental homes, multifamily, and long term rental single family homes, the historical numbers don't work at the new prices. But you need to dive deeper into the numbers and look forward not back. those of you that know me know that I spend a lot of time in the commercial market as well and I can tell you that demand for office space and industrial and medical space is very high and the per square foot rental numbers will be increasing sharply with new leases. Make sure you always do your own research. My conclusion however is that forward looking rental numbers are high in most markets. These higher rental numbers are pushed by demand, not by the cost of building or replacing existing income properties.
I often hear the comment: “these numbers just don't make sense”, in fact I was one of the ones making that statement. But as I got involved in looking at what the monthly numbers are for vacation rentals, for warehouse space, and for medical space, I believe the numbers do make sense on I “go forward” basis. I have sold two homes in the past three weeks above the $800,000 mark that will be used as vacation rental homes. The numbers work. if you want to see and analysis I did for a $1.2 million canalfront home for a client please PM me and I'll get you a copy. It's important to me that my customer supplies the numbers for input or the numbers come from an independent third party.
But is it a sellers market? It is true that prices are being LED upwards and this is a good time to sell if you have a wise alternative for the funds. It's a great time to own multiple real estate properties. But I would suggest you look hard at keeping your extra property you're thinking of selling and put it to work for you as an income property.
Property that is superfluous to your needs, or you are thinking of selling, you may also consider converting it, improving it, or borrowing against it, and putting that money to work. While interest rates are 2% higher than they were a year ago, I believe the number is about 1/3 of the inflation or appreciation rate. So money is still relatively cheap. (And I love the fact that borrowed money is tax free).
Best to you and those that you love on this Easter Weekend,
Real estate has been my passion since I took my first Al Lowery class on real estate investing in the 1970’s. I vowed during that class that I would buy one property a year. Over the next five ....
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