Buyers – What You Can Learn From Investors

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Posted on February 9, 2012 by Karen Crowson in Buyers

Buying a home in today’s market can be a bit scary – at least at the surface. Almost everyone knows someone who has been left in a precarious position due to a housing purchase.  Maybe even you or your parents!

Do you know what group is buying property?  Investors!  So what do they know, that the rest of us don’t? 

Investors who purchase real estate typically look at it as a buy and hold investment, an important part of their portfolio. They look at it historically.  The craziness of the early 2000s prompted people to buy high and sell quickly – and at that time it was for a tidy profit.

But traditionally, people bought real estate for other reasons:

• Shelter
• Residual income
• Long-term investment, wealth building   

So think about those reasons when you consider your own motivation for purchasing a home. Do you plan to live there yourself?  If you don’t buy your own home, will you paying a similar amount of monthly rent, helping someone else make their mortgage payment?

Are there properties in your area that would actually have a mortgage payment equal to, or perhaps even exceeding monthly rents? (providing income?)

Have you considered how the mortgage interest deduction may help your tax situation? (definitely talk to your CPA or tax preparer about this).

One appraiser I met recently said this is the most robust investor market he’s seen in his 25- year-career. If investors see this market as a hot one, maybe it’s time to look at it through their eyes.

It’s shelter for someone.

• Overtime, rental rates become higher than mortgage payments (assuming you’ve purchased with a 30 year fixed rate and don’t pull equity out of the home). Now you have monthly income from that purchase)
• At a future date, the property can be sold for a profit, or held for the monthly income it provides.

We have to get back to basics and think of real estate as the long-term investment it was always meant to be.