Win With Your Real Estate Investment Strategy

November 26, 2010 in About Edy and the Team, Seattle Buyer's Guide, Seattle Investor's Guide

Investing In the Seattle Real Estate Market

The market is ripe for investing in real estate for a couple of reasons: first, prices are the lowest in many years; and secondly, financing rates are also the lowest in over 20 years.  So what’s holding everyone up?  Primarily, the current economic disaster is keeping people from committing to expand their resources into the market.   Why is that?  Because people are getting inundated with news about “short sales” and “foreclosures”  and are afraid to make a mistake.  This is understandable as most of us don’t want to lose what we have.

A key to investing in real estate today is ensuring that the investment will survive outside of you.  What that means is that if you decide to purchase real estate for investment, what is your end result and how do you get there without much risk.  Depending on the levels of investment into the property that you can make it is still possible to purchase single or multi-family properties (1-4 units only) with manageable risk.  If your goal is long term, which is the only way to invest in real estate, then you need to evaluate the property for what it could potentially rent for and what the accompanying expenses to owning the home is.  Once you know what both are, you put enough down to cover the expenses and provide you with a margin for future major expenses such as roofing, replacing hot water tanks…etc.  Now do not take the highest possible rental rate and evaluate it by that but take what is the lowest amount it could rent for and use that figure.  The reason for that is simple, if the home can still generate the income to cover the expenses at it’s lowest rental rate, anything you get above that is gravy.

Now, how you get the home at a low enough cost and financing at the rate necessary is  a function of how good your real estate broker is, how willing the seller is and how much you have to put down.  Luckily, there are so many houses on the market that you can find a willing seller if you look hard enough.  If one isn’t willing to negotiate, move along.  For whatever reason, they need to sell, otherwise the house wouldn’t be on the market, but you don’t have to but that house as there are others.

Previously, we mentioned multi-family but only 1 – 4 units, why?  Anything less than four units is considered residential and can qualify for 30 year fixed rates, which is what you want.  More units than that is considered commercial and will have short term, usually three to five years and fees at inception and every renewal.  This is very high cost investing.  It is much easier to budget knowing what your payments are for the next thirty years.

Oh and by the way, do not finance using an adjustable rate mortgage.  In most cases, this is like taking a house and giving it commercial type terms.  Sure you might get a good initial rate but unless you’re going to sell it in a short period of time, it will probably end up being more expensive financing as you will be paying fees every time you have to renew it.  Remember, investing in real estate today should be considered long term.

We are currently putting together a Seattle Investment Handbook for small property investors (1-4 units) and would be glad to send you the complete handbook, just email Edy at edy@seattlecentric.com.