To say the investment market is unsettling is an obvious understatement. The market is up, then down 8% in the last ten days and the news suggests that this roller-coaster ride may continue for awhile!
Preservation of capital is probably today's most important investment consideration (especially for those enjoying or nearing retirement) and making a profit would be a bonus. Of all the conventional investment alternatives like stocks, bonds, mutual funds, gold, commodities, CDs and annuities, housing could be one the best asset classes in America. Â I always say that Iâ€™m a great believer in investment real estate: you use other peopleâ€™s money (a mortgage) to handle the major part of the purchase of an investment, the tenantsâ€™ pay off that mortgage (albeit slowly), you immediately enjoy the available cash-flow + realize the lowered principal balance/equity accrued caused by the tenants paying down the mortgage!Â So, even if there is NO appreciation in the housing marketplace (which I think we can expect in the short-run, but eventually our economy will recover and natural appreciation will begin), you win!!Â I certainly canâ€™t say that about my mutual funds!!
Homes have had a 30% to 40% price correction in the past four years. Mortgage rates are at near all-time low rates with 30 year terms available for investors. Rents have increased significantly over the past two years while vacancy rates have decreased. People will always need a place to live.
Five year certificates of deposits earn a little over 2% but rental properties are yielding much more than that. Income properties are tangible assets that have benefited dramatically in inflationary times. Cash assets can be devastated by inflation and diversifying into income properties could provide some protection.
Single family homes, duplexes and multi-plexes offer investors the opportunity to borrow large loan-to-value mortgages at fixed rates for long terms on appreciating assets with tax advantages and reasonable control. Investing in rentals can provide a high rate of return!