Is Home Ownership a No Brainer? It Depends… Home prices have fallen so low that they are below replacement costs in many areas. When coupled with insanely low interest rates, owning is a better deal than renting for many, according to Richard Green, Director of the Lusk Center for Real Estate at University of Southern California. Green told San Jose Realtors that "if you know you are going to live in a place for at least five years, it's just silly" to not consider making the move. [Matt Carter]
Becoming a homeowner is little different from being / becoming a landlord. It is a “simple” matter of both economics and speculation. Yes, I said speculation, but we’ll observe that it is something more akin to an educated guess. Let’s break this down into several steps.
1. Real estate is on sale, in a big way! There are opportunities like never before to buy property for pennies on the dollar, properties listed below market value (for instant equity) as well as properties available at below replacement cost. FinestExpert.com has pre-analyzed property nationwide to allow you to specify how much of a discount you demand and will show you only those homes. Let’s say you want to only consider property that is asking 75-cents on the dollar. Put in a 25% discount for your financial search criteria and then hit search. Remember, deeply discounted properties are likely have more than the usual amount of repair work.
2. Looking only at today’s expenses, does it cost more to rent than to buy. As stated in many places, yes, it can be cheaper to own than to rent. This is good news for both would-be homeowners, because it could be a good time to buy, as well as for would-be landlords, because properties will have positive cash flow. The only challenge is that rents vary drastically by sub-community and which side of the tracks you’re on. FinestExpert.com knows all the current rents, taxes, insurance, and has built in capability to help you identify cashflow properties. Set your financial search criteria to a desired cash flow, or better yet, a desired cash-on-cash return, say 8%, and hit search.
3. What oh what is going on in the market place? Even if the property is on sale and it cashflows, you still need to know whether or not property values are in free-fall, tapering off, have stabilized, or are on their way back up. This is where FinestExpert.com trend charts come in to play. Click on “details” of any property and you can clearly see what property values are doing and, for the landlord, what rents are doing. It may not be a good buy when home prices are stable but rents are dropping.
4. Now we get to the speculation / educated guess part as we discuss issues that require predicting the future. These items include how long you plan to own (or live in) the home, potential effects of increasing unemployment and mounting foreclosures, and of course inflation and interest rates. This issues are complex and will have to be addressed in another post.
There are many factors which indicate that this is a perfect time to buy, assuming you are selecting the right areas. And FinestExpert.com provides you all the tools you need to quickly make such decisions.
Robert T. Boyer, Ph.D.
Co-Founder http://www.FinestExpert.com
@RobertBoyer
@FinestExpert
