The real estate market is hot right now. Sellers are getting lots of offers on properties, and it’s super competitive. Is now the best time for you to purchase a property?
You may be waiting for the market to crash, even though it’s in a bubble at the moment. The honest truth is, however, that you will have a better standing if you invest in real estate now rather than continuing to wait on the sidelines.
If You Don’t Buy Right Now, It Will Be Hard To Buy Later
Many people are interested in buying an investment property but are worried about one thing – the possibility of the market crashing. They are wondering whether it is best to buy a rental property now or wait for lower prices. The market can indeed crash anytime. However, it’s a waste to wait for it to happen before you invest in rental properties.
Why is that? Because the lending criteria gets tighter during tough economic times. The prices of real estate may be lower during a recession, but it is also a lot harder to buy at a time like this. Because the economy is declining, lenders are much stricter on who they lend money to, and it’s unlikely they will lend to someone new.
It’s also more likely that lenders will lend to existing landlords that already have a good track record. It’s not impossible to buy property around this time, but you will be in much better standing if you are already a landlord. The more you can show that you are a great property manager, the greater is your opportunity to earn.
In Real Estate, Timing Is Important
If you are worried about buying a property because of the possibility of the market crashing, what you need to keep in mind is the timing. You need to invest your money into a rental property at the right time so that you aren’t burdened by two mortgages and other costs at the same time.
Timing, however, is hard to determine. It’s a delicate part of the process that needs solid planning before execution. It will be hard for a newbie, but many people have successfully done the same thing before. What you need here is to formulate a plan and learn more about the market to ensure a painless buy and sell process.
Invest for Cash Flow, Not Capital Appreciation
Another thing to keep in mind if you’re worried about the possibility of a crash is to invest in real estate for cash flow instead of capital appreciation. Instead of buying a property and waiting for its value or price to increase before selling it again, use it for a steady revenue stream. This is a much better option if you’re afraid your property will lose its value.
Why should you invest in real estate for cash flow? The reason is that rent is often stable even during a recession, while property prices go down. This happens because property owners also become renters after downsizing. As rents tend to be stable, it’s a good idea to look for properties that can give you a good cash flow.
When looking for a rental property to invest in, focus on whether it can be a good source of revenue. As for capital appreciation, treat it as more of a bonus. If the property has increased value in the future, then it’s great. If its value goes down, it should at least be a great source of passive income while the economy is unstable.
It is highly tempting to buy a property during a property boom, especially those with a value expected to go up quickly, even though it won’t provide a cash flow. But, it’s a huge risk because if the market isn’t in your favor, you could end up with negative equity. What would this result in? You could very well sell your property at a loss to investors who played it smart.
So, what should you do? Plan and don’t be afraid thinking you’re missing out because of the bubble. Don’t let feelings sway you, and be very careful in your decisions. Trust your formulas, learn as much as you can about the market, and work with experts.
You can also participate in our mortgage courses to increase your knowledge, or make use of our mortgage calculator to help you get started with an investment.
If you need assistance, don’t hesitate to reach out. Our financial experts are happy to help.