Making Their Money on the ‘Buy’

I’m just arriving back from the National Association of REALTORS Annual Conference in San Diego where I moderated a panel on Distressed Assets where the esteemed panel and most of the audience agreed that today reflects THE investment opportunity of most of our adult lives. Thinking I was going to hop in my car and drive home, as usual, took an unexpected turn, as my car was “dead on arrival.” So as I sit here in the vestibule at Newark Airport at 1:30 a.m. waiting for assistance, I started checking my e-mails and found yet more evidence that the millionaires of tomorrow are being born today, those who get off the fence and invest.

According to a new Move.com Homeownership Survey affordable prices and foreclosures are attracting investors to the housing markets, and the number of consumers interested in investing in real estate has doubled since March 2009. The survey noted that one out of eight (12.1%) buyers today plan to purchase a home as an investment property, compared to 5.6 percent seven months ago.

Foreclosure buyers, 42% of them, regard their purchases as investments, and intend to convert their foreclosures into rentals (13.2%), fix them up for re-sale (11.3%), or house a family member until the home can be sold at a profit (17.4%). Of the forty-two percent interested in purchasing a foreclosure as an investment, survey respondents ages 35 to 49 (52.6%) were by far the largest demographic.

The Move.com survey found foreclosure buyers expect to profit from both deeply discounted purchase prices, as well as healthy appreciation rates over five years. Most foreclosure buyers (58.2%) expect to pay 20 percent or less than market price for a foreclosure, while 38.5 percent expect a 25 percent or greater discount. While 73 percent expect their properties to appreciate ten percent or more in five years, 28 percent expect their purchases to appreciate 20 percent or more during that same investment horizon.

Oh and by the way, the Federal Housing Finance Administration’s Purchase Index shows that homes have appreciated an average of 15 percent nationally since 2004.

Despite today's challenging economy, demand for home ownership remains strong and first time buyers make up a significant segment of all potential buyers. Nearly ten percent (9.8%) of consumers say they plan to buy a home in the next two years, with 5.4 percent planning to purchase in the next 12 months. Of those planning to purchase a home in the near future, nearly half (48.3%) are first time buyers, with women (52.8%) slightly more interested in entering the housing market than men (44.1%). And, don’t forget the tax credit that was extended.

So, as I wait to get to my home, think about the potential of owning your own home, a second home, an investment opportunity or a vacation property. The opportunities are endless – if you are blessed with he cash, equity or IRA funds to get it done. Remember, as I open my radio show at Income Property Investment Talk dot com each week, “Real estate, if purchased ‘well,’ is the single best investment one can make.