Q: Is it a good time to buy an investment property?
A: It could be a good time depending on what your financial goals are. Whether it's a Buyer's Market or a Seller's Market doesn't matter as much as the deal itself. Will the deal meet your goal, whatever that may be.
For example, you've just had a baby. You're thinking ahead, and you ask yourself how am I going to pay for this kid's college? Here's something to consider: You purchase an investment property now to rent. Naturally, you'd like to have positive cash flow, or at least break even. You never want to lose money.
Consider that your baby is not going to college for 17 more years. If you purchase a property for $150,000, at 3% per year appreciation, that would value the property at $247,000 in 17 years. You'll get the standard tax deductions for owning a rental property over the next 17 years, but look at the equity position that you'll be in by the time your baby graduates from high school: Rents will have appreciated over the 17 year period, while your principal balance has decreased. At a mortgage interest rate of 6.0%, after 17 years you would owe approximately $97,000. Do the math - what's your equity? Roughly $150,000.
At that time, you could sell the property and cash out to use the money. Or you could refinance the property and take out money to pay for school. Even if you don't have enough equity to pay for all of the schooling, you've given yourself a good head start.
So is it a good time to purchase a rental property? What do you think?
If you'd like more information about Real Estate Investing, I have a free twelve week seminar, beginning February 18. For more information, click here.
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Clients always ask me: Are you on the web?
See for yourself.
Tim McIntyre, GRI, Ellicott City Realtor, Catonsville Realtor
Helping Clients Buy, Sell and Invest in
Howard County, Carroll County and Baltimore County
for more than 25 years.
tmcintyre@cbmove.com 410-480-3555
www.timsellshomes.com
