In today’s financial climate, rife as it is with world economies defaulting, US Standard and Poor’s rating being reduced and the stock market providing more frights than a Halloween haunted house, it is difficult to know where –if any place—is safe for the average small scale investor.
Fortunately small investor mortgage financing is a growing business and one bright spot in a somewhat bleak financial landscape. With funding growing stronger, the careful and canny investor can find great opportunities to grow their portfolio.
Commodities, bonds and oil are the most talked about investment choices in the current climate and can indeed provide great returns on money. And yet, there is another underappreciated and largely untapped source of investment potential, one that is tried and true and time honored: real estate investment.
Americans are losing their homes in record numbers, which has the net effect of driving down the price of housing. It would seem at first blush that there could not be a worse time to enter the real estate market, but there is more than one reason to rethink that supposition.
Real estate has always been a prized investment because of the durability of the commodity. Stocks, bonds, commodities, and banks can all bottom out, disappear and default in the blink of an eye, taking the small investor’s hard earned cash with them.
Real property on the other hand is not only a visible, tangible investment—it is as close to “forever” as anything ever gets. Even if buildings are demolished or burn down, the property they are built on is forever, and never loses baseline value. Real prices may fluctuate—sometimes wildly—but never has land truly lost the entirety of its value.
Real estate values tend to be cyclical. In the current economic climate, with house prices declining, the cost of land depreciates too. Investors seeking to make a quick profit will be discouraged from real estate due to the recovery times that are often involved in real estate investment. However, for the investor with patience and a long term outlook, the current real market price deflation is the very essence of opportunity being golden.
In many areas of the country today, it is possible to purchase twice the amount of real property for the average purchase price or a modest property of five years ago, which can yield twice the sales revenue—or more-- when the real market rebounds as it will inevitably do.
Further, people forced out of their homes due to mortgage defaults still must have someplace to live. This has the net effect of stimulating the rental property market, increasing demand which in turn drives rental prices upward. A modest investment now can yield comfortable dividends for years to come.
While there has been much hand wringing in the financial press about the availability of loans, many small and midsized financial institutions have actually weathered the financial crises very well—they have money to lend and are anxious for investor attention. Competition between loan providers is increasingly intense—with a great number of them reducing and even eliminating closing costs in a bid for a bigger percentage of the available business. Also, new loan providers—and their related businesses-- are continuing to enter the market as well—increasing to even healthier levels the competition—truly transforming a bleak picture into an attractive forecast for future financial vitality.
As with any financial decision, research and caution must be exercised—but the bottom line is that the one truly bulletproof investment opportunity that exists is to be found in the real estate market. With planning, foresight and solid strategy, the small investor can survive and thrive in a recovering real estate market.