subject: Is it Finally Time to Invest in Real Estate Again? [print this page] Is it Finally Time to Invest in Real Estate Again?
If you live in Boise, Idaho, the answer is a resounding YES!As everyone who has been involved in Boise real estateknows, the price of homes has plummeted for nearly 50 straight months.While the prices have not started to rise yet, the depreciation rateis slowing and, more improtantly, real estate investments are cashflowing again.
Take it from mean investment group I was involved with purchased nearly 80 homes between 2004 and 2007 before calling it quits.Atthat time, the price per square foot of a typical Boise home rose to nearly $140 per square foot.
In addition, at the height of the real estate bubble, most investors were throwing cashflow out the window.For example, a typical three bed, two bath starter home in the Boise area cost an investor about $1450 per month (typically financed with an 80% first mortgage and a 20% second).
That same home rented out for around $1250 per month, netting the investor a negative $200 per month.No worries, we all thought, it will continue to appreciate at 20% per year and if I hold it for a few years, I'll be netting around $40,000 to $50,000 per home.
When Boise home prices began to fall, investors got hit with a double whammy--losing cash flow every month on a depreciating asset.Now most of those same homes are being sold in short sales or bank foreclosures for around $85 per square foot.Unfortunately, hundreds of Boise homeowners are turning into renters due to credit disasters like bankruptcies and foreclosures.With a glut of new renters on the market and homes at nearly 50% of their peak value, a new generation of investors is finding a great opportunity.
Bottom lineBoise real estate investors can now cashflow again.A client of mine just picked up a $150,000 home.The same home had been listed for around $230,000 just a few short years ago.With 20% down and no mortgage insurance, he is paying around $800 per month.His renters gladly locked into a three-year contract at $1000 per month.
Other investors are picking up single family residences, duplexes, and homes with second studio apartments out back.All are bringing in more in rental income than they are paying out in mortgage expenses.Investors are back to looking at metrics they were ignoring during the bubble.Namely, they aren't just buying houses and "hope they appreciate."In short, it's starting to make sense to buy Boise real estate as investment properties again.
