Time To Buy Rental Real Estate?

Trying to crystal ball where the North American real estate markets are heading is like trying to predict where currencies will be on an hourly basis. It’s extremely difficult if not impossible to pinpoint when is the best moment to jump into an investing market, niche or area.

 

What does all this mean to the small investor who either has – or is thinking of purchasing – rental residential real estate?
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First, let’s look at the fundamentals and really understand what it is we’re evaluating. There is really no such thing as a “national” real estate market. Sure, we can find an average value for all real estate sold across the country and use it to study trends, but if the average selling price of a home in the U.S. is $175,000 that may not mean much to me living in Syracuse N.Y.  Our real estate investing focus should remain local, and indeed, sometimes even restricted to specific neighbourhoods in order to be real for us.

Now we also have very low interest rates and they will likely continue to be low for some time. This too is healthy for purchasing rental income homes, as long as they remain income sustainable (i.e., it’s prudent not to over leverage your rental property with second mortgages that don’t leave any wiggle room).

Also, the economy is still a bit volatile – especially in Canada. This, like low interest rates, may be the new normal and a risk that we’ll just have to manage like all other risks.

So fundamentally, investing in real estate still looks like a solid long-term investment as long as we do our research and choose our properties carefully.

One the other hand, there are still the bubble-bursting theorists clamoring for attention and arguing that the markets will implode. For them, investing in real estate now would be like throwing your money into a high-risk scheme.

Yet, when considering where the real estate market is heading, Donald Trump’s senior advisor George Ross says, “I don’t agree it’s overvalued. I think it’s undervalued….and there is plenty of room for improvement”. What is a humble investor to think?

Well the only thing that makes sense now and that has ever really made sense when it comes to investing in real estate or anything else is to take charge of your own investment decisions. It’s important to collect the data when you’re researching rental income properties, and there are hundreds of books out there that will show you how to do that.

And, yes, it’s important to continue to scan the environment and understand what some of the thinkers are saying about the global economy and its impact on us. But when all is said and done, the final decision must be yours and it must be based on solid facts – not speculation.

If your targeted rental income property will cover your expenses at the current market rents, and it’s in a neighbourhood that you have researched well and understand well, then you will know what decision to take.