How To Generate Wealth During Today's Real Estate Market Turnaround

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In the current real estate market, abundant opportunities are available for a home owner or a first time buyer to generate a sustained revenue stream from real estate that will last them for years to come. Read on to learn about the one real estate wealth generating strategy that you should look into.

Real Estate Market In Summer of 2012

The local Bay Area Real Estate market in California, and many other parts of USA's real estate market are showing great signs of a recovery amidst a gradual economic revival. The jury is out as to whether the real estate market is recovering or not, depending on where you live and how crazy it got to in the last bubble. There may be lingering doubts about whether the economic revival will continue into sustained economic growth and stability after the recent few depressing years. But it is becoming increasingly clear that this is a RARE ONCE-IN-A-LIFETIME REAL ESTATE TURNAROUND that you will see in many decades to come in your lifetime. 

The Ideal Real Estate Investor Of Today

Many of you may have bought your Bay Area houses during the peak and the low mortgage interest rates of the last few years may have possibly helped your finances become more manageable in terms of payoffs of the big balances. If you have managed to build a reasonable amount of savings through stocks, and other investments over the years, you are now in a better position than many others in the market.  

And there are legions of long term home owners in the Bay Area who bought houses long before the peak with much of the mortgages paid down leading to a relatively healthy financial situation. You have built up other avenues to shore up your savings through a good combination of investment in stocks and other assets - hopefully :-) 

Your home values are now rising as you see your property tax assessments move up and your local recent home sales data shows low inventory and many multiple offer situations with properties selling at or above Home Sale List Prices. Besides, the number of Foreclosures or Short Sales in your area has rapidly diminished. 

And then there are first time home buyers who are trying to buy their first home as a primary residence - there are some who are qualified for very good amounts allowing them to target $700K and above for a purchase. This segment of buyers could possibly look into the strategy below to yield lasting revenue streams while also gaining rapidly in the form of capital growth. 

You all are the ideal real estate investors  who can take advantage of today's rare market opportunity.

Obvious But Not-So-Obvious Wealth Generation Strategy

If you have been owning a home as your primary residence, you are probably satisfied with what you have and can depend on your regular employment to produce your regular income stream. If you are a first time home buyer with a loan pre-approval for a large amount, consider the upside potential for a large value home versus a couple of small homes - typically Condos or Townhomes. 

You should consider today's attractive environment that could soon evaporate as the real estate market and the economy regains its steam.  You have a rare opportunity to build a lasting revenue stream and generate capital growth in the next five-ten years through this approach.

Low Interest Rates That Won't Last Forever

The record low mortgage interest rates are not going to last forever - these are already showing signs of bouncing back off the lowest lows but at this point are still very low compared to the peak years when people were willing to buy their first homes. As the economy recovers, so will inflationary pressures that could be compounded by the worst drought in 25 years affecting food prices.This factor alone could lead to higher interest rates let along the impact of growing deficits and deficit-financing through Govt. bonds.

Rents Are Rising As Economy Grows

As the economy shows gradual signs of recovery, employment situation stabilizing,  and growth in increasing number of parts of the country, people who still cannot afford homes or are vary of the commitment of owning a home are choosing to rent. As a result, in 2012, rents for housing in apartments, condominiums, townhomes and   single family residences have risen rapidly. One of the reasons some renters have turned into buyers in this market is in fact this rapid rise in rents. The current renters are future property buyers. 

Home Prices Are Rebounding But Are At Historic Lows

Another factor to consider is that home prices although seemingly moving up near term, are not at their historic highs from the crazy bubble peaks. In fact, many homes are at least 30% - 50% lower than their peak values depending on where you look. For instance, homes on the fringes of the Bay Area were the ones that lost most of their value but have bounced back from the low values.  Looking at various types of homes from condos all the way to single family homes to duplex units, you have a spectrum of real estate units you could look into for the right opportunity. 

Invest Now For Lasting Returns - here's how

Real Estate Investors both within USA and from other parts of the world, including China, have realized this rare opportunity and have been buying properties in the USA over last year primarily as an investment vehicle. While some of the large foreign economies show signs of slowing, and this trend of money flowing from abroad seems to have shown some signs of cooling,  you have a level playing field to invest today. 

Scout for a housing area which is in close proximity to medium to large employers and reasonably good schools. Make sure you look for either an up-and-coming area or an attractive neighborhood for future returns. Check out recent rentals in the area to get a sense of how much these units rent out for and their characteristics, in addition to how long the units stay on market before renters sign. 

Consider setting a target of, say, $250,000 to $400,000 price range depending on where you target and your financial situation, assuming you can put down 20% - 25% - the rest can come from a low-interest mortgage or your existing home equity line of credit depending on your situation. 

Target to buy either a Condo unit, or a Town-home unit, and by all means, a Single Family Home if you have the financial wherewithal, in that reasonably good location with proximity to good employers and schools. 

If you are a first time home buyer with a large pre-approval, split the same for two houses - one a condo and another a townhome. The condo unit can be rented out for very good rentals in the Bay Area while the Townhome becomes your primary residence. The leverage from low interest mortgage outflow coupled with high rents and the tax deduction, leads you to a net income stream for many years (assuming you tied up a long term fixed interest mortgage). The Townhome, being your primary residence, now has a better cash flow management in that part of the mortgage payout on that home is paid for by the Condo rental.  Thus, you have a far better cash flow situation than what would have been if you had gone in for a large value single family home as your primary residence. Besides as years go by, you would have rapidly paid down the Condo mortgage freeing up equity for you for future investments in other real estate. In addition, capital appreciation in the condo and townhome units would be better relative to single family homes allowing you to move up to a great single family home in a few years with a much better cash flow situation than most other large mortgage based home buyers. 

Again, do the math in terms of the cash outflow of principal and interest and factor in the Tax deduction you will receive out of the additional home mortgage interest you will be now paying. 

As described above, you now have the opportunity of continuing to stay in your current home enjoying the peace and pride of home ownership, and also receive potentially net income of rentals over the mortgage payout and tax benefit of the second home. In addition, the lower price segments tend to register better longer term returns as the economy and market improves beyond the turnaround. 

At this juncture, you  have a rare wealth generating opportunity with the above combination of events helping you get real returns over several years. 

Ideal Places To Invest

If you would like to get help with the above strategy, don't hesitate to contact me for places where you can invest for a possible additional income stream with potential future capital appreciation. Contact me at (408) 861-8026 or through the handy form on the right hand side of this page!

Author Ranjana Shreedhar, Realtor:

If you are planning to Sell your house, learn how to make the most for your house in this market and to attract the best offers for your valuable property. Call me for a no-obligation evaluation, and a listing presentation at 408-861-8026.

If you are in the market to buy or invest in a home, learn how I can help you find your ideal home for primary or secondary residence, and be there for you throughout the purchase process.

If you or any of your friends are in the market to sell or buy a home in the Bay Area, I'd be delighted to help you or your friends, as the case may be, achieve your real estate goals with exceptional service, high integrity, and market savvy. 

Contact me through Email or on phone (408)861-8026 or through the handy contact form on this page.

Posted in: Buying Process