Wednesday, February 3, 2010

Is it a Good Time to Buy Real Estate as an Investment?

The economic bubble that burst and shattered a million dreams is still fresh in many hearts and minds, and the scars are deep and yet to heal. But if you were to believe the rumors and the buzz doing the rounds of the industry, you would start to think that the real estate field was starting to look up, and that prices are beginning to rise again.

And so you begin to think of buying a second home as an investment option; perhaps you could possibly rent it out and earn a steady monthly income. Even more tempting is the fact that some good homes are available at budget prices because their owners could not meet the monthly payments on their mortgage and are willing to sell at reasonable rates rather than see their homes foreclosed. But before you jump in to the real estate industry to invest your money, consider this:
  • Second home mortages are usually higher than primary residence mortages. And mortgages payments are usually more expensive than what you can charge for rent. Unless the rent you hope to get on your second home is much more than the mortgage you’re paying each month, it may not be a good decision to buy the home. Also, unless you have a fixed rate mortgage, interest rates have a way of rising quickly. The rent you get may not increase proportionally. So unless you’re buying the house outright without borrowing money to finance it, buying a second home with the idea of renting it to meet the mortgage probably isn't feasible.
  • Additional expenses add to your burden: Although you rent the home, you’re still the owner. You’re responsible for paying taxes,  homeowners insurance, and for looking after the general maintenance. All of these things make your costs add up. So you have to not only pay back a mortgage, you also have to pay much more by way of the house’s upkeep and additional costs. 
  • Cost is not the only factor when buying a home: The house may be dirt cheap, but if it is in an area where most of the homes have been foreclosed, you’re not going to be able to find trustworthy people to rent it out to. You should be sure your renter can afford renters insurance as well.  Also, you don’t know the real reason the owner chose to opt for a foreclosure. It’s best you do your research thoroughly before jumping in and buying a home which you think is a bargain. Don’t believe middlemen you don’t know, and always check your facts more than once to ensure that you’re making the right decision.
This guest post is contributed by Nicole Adams.  She writes on the topic of Construction Management Degrees . She welcomes your comments at her email id:

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