With prices reaching unprecedented heights in today’s hot real estate market, many may think that the numbers do not work to see a return on their investment. They assume that ship has sailed and they missed the boat. But it is still a good time to explore the waters of investment real estate. Here’s why: Rents have increased dramatically over the last couple of years while interest rates remain historically low. This means buyers have more purchasing power: they can buy more house for the same money. Add increasingly higher rents, and they are looking at higher investment returns on a monthly cash-flow basis and on a yield basis than a decade or more ago. While prices were much lower then, real estate investors are actually seeing higher cash flow when they lock in their mortgage loans at a 30- or 15-year fixed rate. This provides more stability and better numbers regardless of the fact that home prices have increased here in Colorado.
Expected Returns on Real Estate Investments
We now calculate the “yield,” or what the property is expected to earn annually on average after taxes. Calculating this figure allows investors to analyze real estate investments against something like stocks or bonds or other types of investment vehicles. This figure is specific to an area, as well, but in Fort Collins, for example, the expected yield on investment properties should hit 14 percent or higher – compared with a decade ago or more, when 10 percent was considered a good number. Colorado has seen a significant increase in appreciation, resulting in higher yields. The 14 percent factors in the cash flow and any appreciation.
Comparing Investment Strategies
When compared with other investments available today, real estate offers more stability. The stock market is often volatile. For those wondering whether to invest in stocks or real estate, they cannot go wrong with diversity, and that is what real estate provides. Windermere’s Investment Kit has convinced many to invest for the long term in real estate, helping them become savvy investors with multiple properties in their portfolio. By doing so they are realizing a more secure financial future for their families – a satisfying accomplishment for both the investors and their Windermere brokers.
If you are interested in learning more about real estate investing, contact a real estate broker today!