if you have the resources, the capitol, the business plan and a team of experts on your side, then you can do it wisely.
I know a group of investors in Marin, consisting at least one Realtor, who are out evaluating and buying homes, rehab them and then turn around and sell with a nice sum of profit. They do nice job, do not under deliver and they have happy buyers helping them to build wealth. They have bought and sold quite a few houses during the past 6 months and I think they do quite well.
I know because my client bought their upgraded home before it came on the market (they know me) and she is very happy. This works extremely well for her because she is a career person with stressful job, and she does not want to have to deal with doing work on the house.
But they are a team of experts and have a well defined plan to follow.
Interest rates and loans that you would qualify for are different for investment property than for a personal residences (but if you intend to reside in it while you are selling your other home....), how long do you intend to live in it? Is there really a good reason to move out of your existing home into another home when you put your home on the market, or are you planning on "what-if's" in case your current home sells quickly, then you have to find a place to live until you actually relocate? Is your plan to find an already fixed up investment home and move into it, then fix up your existing home to put it on the market so you'll get more for it, or to find an investment property that you can fix up and hence make more money on?
Can you handle 3 mortgage payments at the same time (presuming that the first two homes aren't already paid for).
The more times you move your furniture, the harder it is on your furniture and unless your investment home is as large as your current home, will everything fit, or will you need to put some things in storage or get rid of some items?
As you can see, there are many factors to consider, and the market is only one of them.
For reference, there is still money to be made in investment property. What we are seeing, is that as many people who don't have sterling credit can't qualify for loans to buy, they are turning back into/staying as renters so the rental market is increasing at the moment. As a Realtor, we get a lot of calls from people looking for lease purchase homes as well as regular purchases.
I did the stats recently and there are still areas in the metro st louis area where the home values over all have never dropped, there are other areas, where they have taken a nose dive. As Bob noted in his comments, look for a home that will work for you, but work with a Realtor who will run the numbers for you and help you to find a home in an area where the market is continuing to climb, rather than an area where the market is slidng downhill.
You should not expect this to happen to you. I bought wisely with the intention of holding. We just got lucky
Having said this I would certainly encourage people to look in this market. With rates under 5%, and prices down everywhere, this is the best time to buy a house since the 1960s. The key is to purchase somewhere that has an intrinsic value, where other people want to be.
The strategy I am using for myself and recommending for my investor clients is buying single family homes that are ideal for flipping and also good for the rental market. Then rent the property for a year or two before selling. The spread between the purchase and sale price will be better, the tax rate will be less on the income earned from the sale, and you can enjoy a little cash flow in the mean time.
These are the guidelines I offer by investment clients:
1. Know the value of the area homes -- Buy what and where you know.
2. Consider potential resale, even if you are not selling for a while...if a house is by power lines or a major highway now...those drawbacks will still be there in ten years when you need to sell.
3. Know your capabilities...if the property is a tear down and you do not do major construction - don't buy even if it is a great deal...it will end up costing you in contractor fees and mistakes.
4. Especially with popular properties, you will be competing with homebuyers who aren't looking to turn the property...they'll be willing to pay more...therefore, the conditions of your offer have to be better: Faster closing time, non-contingent on house sale, AS IS, not contingent on financing, etc.
Good luck. Dana Tippit