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Remember those millions of people going through foreclosures, short sales and other distressed situations that forced them out of their homes or put them at great risk of losing their properties? As unfortunate as things have been for them, the fact is that there are countless of those properties sitting on the market nationwide, waiting to be purchased.
Not only has this impacted home prices but it has also greatly changed the market as we have known it until relatively recently. In fact, rental units are in demand and have gone up by a very significant 21%! So what does this mean to you as a potential investor? How does this impact your potential return on investment – even if you are not an investor?
As Warren Buffett advised recently on CNBC, buying single-family homes is an excellent investment today with the low home prices and record setting low interest rates. He stated that for individuals planning on keeping the home at least seven or eight years, the returns will be significant.
Even if you are not a full-time investor, this could not be a better time to buy a home for this purpose. Let’s look at an example of a home listed for $250,000. We can assume the interest rate of 4.25% on a 30 year fixed rate loan (though in many markets buyers can get as much as a point lower depending on the borrower’s credit and loan terms). In this scenario, the monthly payment (including taxes and insurance) will be approximately $1,700. The typical monthly rental income is about $1,200 for an average home in our market – leaving a profit each month in this example of $500.
Nowhere else can an investor get such a significant return on investment than in the housing industry right now. The plethora of previous homeowners that have lost their homes to our economic circumstances often choose to stay in the same communities, resulting in increased demand for rental units. But it won’t last long. Interest rates are bound to come up – as are prices. But before they do, it’s a good idea to invest in a second property now.
Need some more convincing? Contact me, Jenny Staples at 215.498.0193 with the Jeff Silva Team and I would gladly talk to you about this – or any other real estate needs you may have. I look forward to hearing from you!
