Real Estate Investment During Recession
A recession is a time when everyone becomes more cautious in his investments and may even decide to keep off investing altogether. But real estate is never an ordinary investment and should be considered as an avenue for investment in spite of the economic downturn.
Everybody in the United States does need a house, so the need for real estate will remain at all times, whatever the state of the economy. And over the years it has been proved that the value of real estate has always shown a rise, and can therefore be safely invested in. You do pay interest for the mortgage on your real estate investment but you also get a tax write off on the interest you pay as well as any property taxes that may become your burden once you invest in real estate.
The economic downturn has led to mortgage rates being the lowest since 1960 and therefore you can get that real estate really much cheaper than you could have last year. The repossession of homes due to mortgage payment defaults has also led to a lot of cheap homes coming on the market and if you have the capacity to pay the mortgage, pick up a home or two cheaply and wait for the market to rebound, so that you can cash in on it.
Do not get fooled into higher prices as asked for by agents. Their commissions are based on the value, and his cut would therefore be better if you pay a higher price. If a home has been foreclosed by a bank because of default in payments, you could bargain and get a reduction on the price asked for as banks are more interested in recovering their money and not really bothered with the real estate or its actual value. A reduction of 20% of the price asked for is a fair value. Just make sure that you are in a position to make the payments in future and do not get foreclosed yourself at a later date.
Find out how long the house has been on a market. If it has been there for quite some time, than the price being asked for is too high, or the house has other problems. Make sure that you inspect the house properly before buying it. For a house that has just come on the market, a reduction in price is only justified if you are sure that the bank is about to foreclose on it. If the house has been in the market for over a month or two feel free to reduce the asking price. If the house has been on the market much longer, it means that the owner has the means to hang on and will not reduce his price.
It is always good to know why the owner is selling. A state of neglect and disrepair would indicate that the owner is in financial straits and would settle for a lower price. So make your real estate investment even during the recession, but only after properly studying all facts and being fully informed before you make your first offer.