Investing With a Defensive Mindset

Published by julia | Filed under Buyer / Seller Tips, Miscellaneous, Real Estate, Uncategorized

Most people believe that they can only make money in real estate business when real estate market is performing well. Indeed, most people have made money when markets were performing well but this was because of luck, not market timing. Therefore, in order to profit from real estate market, it is important to know your market so that you can plan your strategy of investment.

Meaning Of ‘The Market’

Most people think that the real estate market is as thriving as the stock market. This is because of the confusing daily media reports on the housing market. There are a number of factors that affect the market and your strategies for investments.

Sale of New Homes

Market economists use data obtained from new home orders and permits to gauge the weaknesses and strengths of the housing market. However, due to unavailability of land in places like the inner cities, no new homes are constructed unlike in the suburbs where there is an oversupply of homes due to availability of land coupled with the huge potential for home construction.

Re-Sale of Homes

The rate at which homes are resold can be used to indicate the market particularly in areas where new homes are few. The information is received from the Realtors Associations.

Rates of Rental Vacancy

Rental vacancies are relevant to the values of multi family housing since they help reveal what is going on in the buying arena of the single family. Anytime interest rates are low, the rate of buying homes increases on the lower end of the scale since, it costs less to make payments of mortgage than to make payments of rent.

Comparing Apples with Apples

Since multifamily and condominiums have different buyers, which creates a strong demand for one, it is advisable for one to compare single-family homes when analyzing sales data and home building.

Applications for Mortgages

Some of refinancing is driven by the improvement in efficiency on processing loans and reduction of cost and low interest rates. The other is the total number of defaults on the processed loans and the foreclosures caused by sloppy lending practices. However, a person can always refinance again if the market increases. However, once they stop and the high leveraged borrowers are no longer able to refinance or sell, that is an indication that the market is softening up.

Going Local

These statistics are based on nationwide facts, which are usually not important to investors who purchase in emerging local markets. The stock market relies on indexes in order to determine the market but this may not be important if one has only two stocks. In addition, it may not really matter how many homes are sold nationwide when one is purchasing homes in Cleveland. Thus, it is advisable to focus on local and not national trends. However, this is subject to the following two exceptions

1.    Rates of interest

Nationwide and worldwide factors for example the Federal Reserve coupled with competing investments such as bonds and stocks and worldwide markets control rates of interests. Anytime rates of interest fall, the cost of housing reduces since the monthly payments also reduce.

2.    Taxes on income

Federal income tax rates vestment properties can cause sweeping changes on the market of real estate nationwide. It is advisable for you to educate yourself on all phases of both local and national markets before acting.