No matter what the state of America's economy might be on any given day, one question is sure to be asked.
"Is this a good time to invest in real estate?"
Though the answer depends upon the individual asking the questions -- as well as his or her personal circumstances -- according to various experts, it might be "yes."
"In 2010, the housing market will experience one last gasp before its turnaround begins in earnest. One million foreclosed homes will be dumped on the market as banks clean out their inventories," says Gregory Rand, managing partner of Better Homes and Gardens Rand Realty and author of the blog "House Rich." "This will create the last opportunity in this wild and woolly housing cycle for buyers to invest at a historical low point. The way I view it, a million people will have the chance to buy the homes of their dreams at overcorrected prices as banks unload properties and finally write down their losses."
Billie Redmond, CEO of Coldwell Banker Commercial TradeMark Properties, agrees. "Our experience is that there has never been a better time to buy for yourself or as rental property," she says. "It's the best pricing we've had in 30 years. The choices are unimaginable."
Brandon Green, founder of Brandon Green Companies and a broker with Keller Williams, believes that now is a fantastic time to invest in real estate if one of the following categories applies to you. "One, you're going to live there. Two, you are buying an investment property and know your margin of return right down to the dollar. Or three, you have cash for great deals suited to cash," he says.
Some buyers will continue to wait to see how low real estate prices will go, but that could be a mistake, according to Jeffrey Rogers, president and chief operating officer of Integra Realty Resources. "Most property values are on a recovery, and buyers should act now as prices are continuing to rise," he says.
Yet not everyone agrees that now is a good time to buy. Searching and waiting for the "best time" to invest in real estate is a false consideration, says Gunny Scarfo, creative director of a custom real estate firm. "Most people want to know if 'now is a good time to invest in real estate.' This kind of thinking is a bad investment strategy already," Scarfo says. "Good real estate investors never invest because they think a local market is going to rise. ... That's too dangerous a guess. Good investors act when they're able to buy a specific property with an excellent secure rate of return from rental income."
Individuals looking to invest in real estate must realize that they have a lot to learn, according to Jim McClelland of Mack Industries. He has been investing in real estate for more than 35 years. "Some newbies have been in the business a few years and think they know it all," says McClelland, who owns 400 rental properties worth a total of $50 million. "You can't read a book about it and get rich."
Investing in real estate can make a person financially independent, but it doesn't happen overnight. "Real estate can be phenomenal for long-term appreciation. You need to have a long view and hold it for 10 to 15 years," he says, adding that equity is built as the mortgage decreases.
Quite simply, there is a lot to learn, he says. "A buyer will need cash or to be able to borrow the money from a lender. If you are looking for rental property, you have to see not only how much the house is worth but also how much work it needs."
A real estate investor needs to do a market analysis that includes what comparable houses in the neighborhood are selling for. He or she also must figure out what it would take to generate a positive cash flow, including the monthly cost of the mortgage, repair costs, insurance costs, tax amounts and, if the owner chooses, the cost of hiring a property manager or management firm.
McClelland advises the average person work with a real estate agent he or she trusts. "This is especially important if someone is dealing with bank-owned property," he says. "The average person knows nothing about dealing with banks."