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A Ripe Moment for Real Estate Investors

By Michele Lerner

Even a novice real estate investor can tell you the secret to a successful investment: buy low, sell high and, in between, rent for the maximum possible cash flow.

After years of struggling with the aftereffects of the burst housing bubble, real estate markets across the country finally seem to have hit bottom. At the same time, rents are rising and mortgage rates are low. This may be a uniquely perfect time for real estate investors to reap the benefits of low costs and potentially high profits.

While all real estate markets are different, on a national basis, the housing market may have turned a corner in June 2012. According to Zillow’s second quarter Real Estate Market Reports, home values increased 2.1% from the first to the second quarter of 2012. On an annual basis, home values rose 0.2% from June 2011 levels marking the first annual increase in U.S. home values since 2007.

Many local real estate markets have already turned the corner and are seeing price increases of 4% and higher. Check out your local market to search for properties and neighborhoods where prices have begun rising or in adjacent areas where improving values are expected.

For instance, more than three-fourths of Dallas residential neighborhoods are seeing higher home prices this year. This is happening across the United States. The National Association of Realtors has reported a big decline in the number of houses for sale over the last few months.

It's hard to time the real estate market or pick the bottom, but again, with loan rates low and home prices stabiliziing or rising, it's time to buy.

As an investor, you may want to find a way to pay cash to eliminate borrowing costs. If you are a first-time real estate investor or simply need to finance your property purchase, record low mortgage rates offer a great opportunity to keep your costs low.

You can check out current mortgage rates on sites such as www.Bankrate.com, www.Shoprate.com and www.HSH.com, which reports that the average interest rate for a 30-year fixed-rate home loan during the week ending June 20, 2012 was 3.66%. Deeply discounted interest rates are just one side of the cash flow equation for investors. The other side is your rental income.

According to the U.S. Census Bureau, rents rose on a national level by about 4% from 2011 through the first quarter of 2012. In many cities, such as New York City, rents rose by as much as 9% between the second quarter of 2011 and the second quarter of 2012, according to www.CurbedNY.com.

Rents, just like property values, vary widely according to your location, but you can compare rents by zip code on sites such as www.RentVine.com and www.City-Data.com. You should also research rents on properties similar to what you expect to buy in order to evaluate your cash flow.

Appreciating values, low mortgage rates and rising rents may be just the triple play you need now to get into the investment property game. Yes, the real esate collapse is a thing of the past now, and it seems like we can finally take a breath and look towards a brighter future in the real estate market.


Michele Lerner, author of “HOMEBUYING: Tough Times, First Time, Any Time”, has been writing about real estate and personal finance for more than two decades for a variety of print and web publications.

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