If the Mayans are Wrong, Real Estate Investing Looks Great in 2013
According to the Mayan calendar, the world is going to end next Friday. These end-of-the-world scenarios grab my interest, but the only outcome I faced from the last Doomsday in 2000 was a hangover that rivaled an Apocalypse.
With that said, you may want to take a trip to church or call your Mom some time before the end of next week.
If the Mayans are wrong, and I hope they are, 2013 is going to be a great year for Real Estate investing – specifically for rentals.
I have been a proponent for rental properties for a long time. They can provide cash flow, increase net worth and build wealth like few other investments can. In a recent Fannie Mae study, additional indicators point to 2013 as prime time to grow a portfolio.
The interest rates right now are ridiculous. Really! They’re incredibly low. After our economy finally digs out of our current slow-down, these rates will certainly rise. It is unlikely that we will see such low interest rates again in our lifetime.
According to the Fannie Mae US Economic and Housing Market Outlook, the low interest rates will be sticking around at least through next year. The report indicates slightly higher rates in the fourth quarter of 2013, but states that rates should stay below 4%.
Score 1 for cash flow. These low interest rates are a great opportunity to lock in low overhead for years to come. Buy now and get your cash for free – or almost.
Buy at a Discount
While home prices in most regions are stabilized and on the upswing, there are still deals to be had. Even purchasing a property at market value today (if the cash flow is good) can be a huge discount just a few years from now. Now is the time to buy.
According to Fannie Mae, home prices will increase between 2-4% next year. Demand for primary residences will increase as our economy continues to recover. Higher demand results in higher prices. This scenario is a perfect example of the old investment adage – buy low and sell high.
Increased Demand with Decreased Supply
The number of household is estimated to increase in 2013 by 1.25 million. Increased demand for housing caused by these new households is nothing new. But the surplus of housing inventory caused by the housing bubble of the last decade provided plenty of choices for new households. As recently as this past summer, supply and demand normalized.
With only 1 million new housing starts expected in 2013, the demand will outpace the housing supply. Expect lower vacancy rates and higher rent rates in 2013. Fannie Mae projects these rates to compare to 2002-2003 levels. This is a best case scenario for Real Estate investing.
Excluding the world ending next week, 2013 looks to be one of the best times to get into Real Estate for the next several decades. The cash flow and appreciation opportunities are unlikely to be seen again for a long time.
If the Mayans are wrong, next year is going to be a great year. But just in case they’re not, I’m going to spend some extra time with my wife and kids these next few days. That’s an investment that never fails.