Thursday, May 18, 2006

Knowing When to Run

Bankrate looks at the investment market, including this blurb about Sacramento real estate:

Savvy investors know when to hold 'em. They also know when to walk away and know when to run...

Jim Lofgren, executive director of the Rental Housing Association of Sacramento Valley, says with more potential investors eager to park their money in a house, finding one worth the risk is more difficult. There is "a lot of competition" for the good investment properties, Lofgren says. "It's tough to find a good bargain out there.

"It is really important for investors to determine: What is their investment strategy? If you're looking to make money real quickly, you'll have a tougher time in the market now," he says. "There's not the appreciation there once was. This is a market where people are looking to the long run."

Lofgren's co-worker, Cory Koehler, has that long-term mentality when it comes to his pending investment purchase. Koehler, deputy director of the Rental Housing Association of Sacramento Valley, planned to close on his second rental property -- a single-family home -- the first week of May. Both of the homes Koehler rents out are in Sacramento County, Calif.

Spending money to make money

Although Koehler thinks he will not have a problem finding a tenant for the new house, he says he will have to give out of his pocket "several hundred dollars" to make up the difference and pay the mortgage. That, of course, doesn't include all of the other costs of homeownership, plus possibly carrying the entire mortgage if the property is vacant.

However, Koehler says with all of California having pricey real estate, he didn't have much of a choice but to get into the market. "The market is quite high and the rental market is quite soft," Koehler says. "The appreciation on real estate in the last three to five years is in the double digits."

Since real estate has been so tempting, more renters flocked to becoming homeowners, eroding the tenant pool, he says. Koehler is counting on the house appreciating and area rents rising. "I'm willing to be patient," he says.

1 comment:

tom stone said...

wow,"long term" textbook says "any property bought primarily for resale is speculative in nature" but here where a properties rent doesn't even cover the note,it is called long term investing.i think this is cognitive dissonance rather than is so widespread.i may well be wrong since by definition half the populace has an iq under 100 and many people are chemically impaired.