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Investing in Real Estate
Transcript of Investing in Real Estate
By: Trevor Kresin Goals For This Presentation 1 2 3 Understand the reasons the housing market bubble crashed and how to avoid another crash To realize how the crash has created advantageous conditions for investing To understand why investing in real estate, especially at a young age, is a doable and solid financial path 2006-2009 Marked the most devastating housing market crash for the United States in almost a century Housing prices fell almost 32% More than 2 million foreclosures in 2008 Traditional Housing Price Trend Years Preceding The Crash (Steady Rise) (Steep Climb) Crash Bubble Popped The recession of the economy was due to the collapse of housing bubble
(Money that would not exist if housing prices followed their usual patterns) Home prices traditionally keep pace with the general rate of inflation. In the period from 1995-2004, prices exceeded the rate of inflation by more than 40 percentage points thus increasing the bubble wealth. Too Much Debt Real Estate has been long thought of as a safe investment Created demand in the housing industry Banks fed off of this mindset and allowed people to
borrow greater proportions of house values Did this via subprime loans which allowed people with bad or no
credit history to buy a house. Banks basically handed out loans to
anybody who wanted one. Lessons to be Learned Keep debt at a lower level Invest within your means It is harder to get a loan now Do not attempt a loan you cannot handle $12.5 trillion was borrowed out of $22 trillion of real estate held in 2006 Stricter restrictions have been placed on banks and their loaning practices Foreclosures Millions of Families had their houses foreclosed on between 2006 and today
At a rate 225% greater than average In March of 2011
1 in every 146 houses received a foreclosure filing April of 2011
4,078 foreclosures on the market As an investor, you have the option of buying property dirt cheap
From the bank in pre-foreclosure
Negotiating a fair price from the homeowner
At auction from the bank Interest Rates People were paying higher interest rates during the housing boom People fell into adjustable mortgage loans which would adjust your interest rate after a certain period of time Have gone down considerably PRICES At a long time low Foreclosed houses are often times being sold at original cost of
Building the house
Buying the land Illustrates how low the values have dropped Prices have basically dropped back to the prices of houses in the 90's OvervIew With such a glut of foreclosures on the market
prices have dropped significantly. Not only have prices dropped so much, but interest rates are low since restrictions have been put on bank lending practices. Therefore, it is an inexpensive and ideal time to invest. INVESTING There are many ways to invest in real estate
Real Estate Investment Funds (REIT's)
Rentals I am going to focus on buying rental houses Most common type of investment
Involves renting the house to a tenant Typically, a landlord will charge a monthly rent greater than the monthly mortgage payment Much easier to do post crash since prices are so low Before the crash it was unheard of to buy a house and rent it for profit right away Example My brother has a $30,000 loan through the Air Force Say he put $20,000 down as a down payment Houses in Fernley are cheap. Very common to find new houses for around $100,000 (Previously worth around $200,000) 642 Canary Circle lies a 1493 square foot, three bedroom two bath, fully landscaped residence which was built in 2006. The selling price for this house is $84,900. If he put $20,000 down, it would result in a $64,900 loan. This loan would be taken out for 15 years at 5% interest, thus, resulting in a monthly payment of $355.07 (642 Canary Cir.). Average renting prices in this area are $900 for a similar house. This means after the mortgage payment, he would have a profit of about $500 monthly. FINALLY Investing young is ideal
Give your property the most time to appreciate in value.
Learn to live beneath your means Obviously not many people have enough money to invest into real estate currently.
Save your money, become more frugal
Develop good credit this will help you get a loan
Team up with someone who has money
Do it before you start a family and have real obligations "642 Canary Cir, Fernley NV 89408 | Homes.com." Homes.com - Homes for Sale, Real Estate &
Rentals. Web. 20 Apr. 2011. <http://www.homes.com/listing/130789990/642_Canary_Cir_FERNLEY_NV_89408>.