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Tuesday, August 10, 2010

Investors Are Back! Why Is That A Good Thing?

If you ask most people, they'll tell you that investors drove prices up and caused the housing boom. Well, that's sort of correct.
At the beginning of the housing boom investors were purchasing properties and making wise business decisions, and then the "get rich quick" amateurs came in. These are the people who saw the profits that investors were making and wanted to cash in on a quick buck. They got 100% financing on properties they knew they could flip in a matter of days or weeks. That worked out great for them for a while but these first time investors didn't bother to stop and really look at what the market was doing. They only saw dollar signs. Before the market reached its peak, the true investors had pretty much left the market and were sitting in the corner counting their money. In my opinion, these amateurs actually gave investors a bad name.
A seasoned investor will analyze their decisions and can tell you how much appreciation is expected and depending upon the market, how much rental income they can expect to receive from the property. These seasoned investors have waited their turn and are now coming back. They may be seen as vultures but a lot of times they're the only ones willing to buy the dilapidated houses and fix them up. They are once again making calculated decisions as to repairs costs, potential rental income and eventual appreciation.
As a REALTOR, I see investors as a good indicator of the market. Since investors constantly watch the market they typically can see the rise and fall of the real estate market before it actually happens. Right now, investors are seeing that it's a good time to find great deals, fix the property and rent it out until the market allows enough profit to sell it.
So, next time you're having a conversation about the cause of the real estate crisis just stop and think about whether the blame should really fall on the seasoned investors.

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