To Invest or Not to Invest – And Real Estate Looks Good

Real estate investors who are speaking to others about the business sometimes are helping them to see the value of rental property investing. This is especially true if you’re wholesaling and constantly canvassing for investor buyers. Some are even giving seminars or webinars to interested parties considering real estate investment.
When the subject of risk comes up, some of these would-be investors may be very cautious. They may have significant money in savings accounts, certificates of deposit, and in sedate dividend-paying stocks. If we consider savings accounts and certificates of deposit as something less than “investing,” then we can help these people to make decisions about moving assets from these very low return asset categories into real estate.
• Cash is a depreciating asset due to inflation. Keeping money in savings accounts and CDs historically has been subject to significant damage from inflation.
• With many savings accounts these days paying sub-1% interest rates, the historic 5% average inflation rate takes it all and then some.
• Inflation eats away at cash, but it usually helps home values over time, as the costs of labor and materials to build are going up, taking values with them.
Sometimes this is just pointing out the obvious, but they just need to hear it from someone who can show them double-digit returns through real estate.
Home Building and Housing Affordability Numbers Look Good for Rentals
The recent housing market index is beginning to show significant weakness. The NAHB, National Association of Home builders, said that its housing market index slipped from 56 to 46 in February. It’s now at its lowest level since March of 2013. A number below 50 indicates a deterioration of sales and potential buyers in the market.
Even though housing affordability numbers are looking better for buyers and interest rates are very low, there isn’t much buying going on. Even though the housing-side numbers are looking better, the economy and job numbers aren’t helping. Even if Millennials find that they can buy more house for the money or even get a mortgage payment lower than rent, they aren’t buying. They’re living with their parents, getting lower paying jobs than they want, and paying off student debt.
People are renting, and more of them are renting than last year. It doesn’t matter that much that there are deals out there for buyers, as the economy is keeping them out of the market and renting.