The real estate market throughout the United States has been a roller coaster for the past several years. This has caused many people to make some wild guesses about what will happen to it over the next several years. A lot of people who had considered diversifying their portfolio into this sector have even wondered if it is worth getting into. While some areas that hit rock bottom are beginning to show sharp increases in property values, other areas have yet to see any increase in home prices. Figuring out whether or not to make the investment into the real estate market is really a complicated question.
In order to answer this question, many people look to advice from people who have been investing in the real estate market for years. It has been estimated that large investment groups contribute to about fifteen percent of the overall market, making them a very important group to analyze in order to predict where the market is heading.
Recently, several large groups of investors have announced that they are using depressed real estate prices that can still be found in some areas as an opportunity to buy as many homes as possible. While a lot of analysts have written about how the declining real estate market has hurt individuals and small investors, groups with large amounts of capital are able to seize on the opportunity to buy up the record number of foreclosures and short sales.
In some of the recession’s worst hit areas, such as Florida, Nevada and California, investment companies have been able to buy entire condo buildings and sub-divisions of houses. In most of these cases, investors are buying packages of foreclosed properties directly from banks who do not want to be in the landlord business, nor do they want to have unattended property on their books. Smaller investors are using the opportunity to buy smaller numbers of units. While an individual can rarely make the large purchases of homes that the larger investors can make, there are a number of people who are reporting that they have their pick of homes that make ideal rental properties.
After buying these so-called “distressed” properties, investors are making repairs and small upgrades, then renting them out. The large numbers of individuals and families who have recently gone through a foreclosure has meant that there are large numbers of people who are forced to rent. Landlords who have the means to offer houses to these renters are in a good position to make a profit for the time being. However, several analysts have cautioned that many of these renters will be looking to buy again as soon as they are able to repair their credit and establish a steady income. For this reason, many analysts are warning against over-investing in real estate.
In other words, in order to make a profitable investment, a potential landlord will need to think about the long-term implications of his or her purchase. Rather than simply making cheap repairs and flipping a property, a smart investor will consider the long-term value of a property. While keeping costs such as the mortgage low will be important, it is more important in many cases to consider the long-term maintenance costs and rental value of the property. Of course, if the rental market in an area collapses because so many renters now have the means and ability to buy a home, an investor will have to consider if the property can be improved in a cost-effective manner in order to entice a buyer.