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Consider all factors before investing in real estate

On Behalf of | Oct 3, 2012 | Residential Real Estate |

With interest rates low and home prices that still haven’t rebounded since the recession, some might think now is the time to look to residential real estate in the Philadelphia area as an investment.

Signs are looking up, but prospective investors must remember that not every investment will turn a profit down the road. Risk exists with every real estate transaction.

Housing statistics show that nationwide, housing prices rose 1.2 percent for the year that ended in July and have grown about 8 percent from the drop in early 2012. At the same time, sales of existing homes rose 9.3 percent in August over the same period last year, and a rent index indicated that rents have grown by about 6 percent nationwide.

For people who want to buy a duplex, smaller apartment building or single-family home, those are three favorable measures. But, experts caution not to buy a property thinking the rise will continue with a profit assured. While all of these figures are good news for potential investors, they need to remember that the economy has shown other positive signs, only to collapse again.

While now might be a good time for an investment in rental real estate, it isn’t the time to take a chance unless that purchase would represent just one asset in a larger portfolio, one expert said. Real estate should take up no more than 15 percent of a person’s total holdings, he said. Diversification is key.

Also to consider is investing in real estate investment trusts or mutual funds that invest in them.

Generations of American investors made their fortune in real estate, but now might not be the time to plunge into it. Investors might just want to dip their toes in the water. As with any large investment, people should consult a team of experts, including financial planners and attorneys, to advise on or assist with the purchase.

Source: Money Magazine, “Is buying a rental property now a sure bet?” Walter Updegrave, Sept. 26, 2012


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