Friday, December 28, 2012

The hottest real estate market for investors

In true Monday morning quarterback fashion the national media is recognizing what those of us in the real estate trenches have been saying since 2009: Houston is probably the hottest real estate market for real estate investors at the moment. And it is projected to retain that status for the foreseeable future in 2013. If you are skeptical of that strong statement, tell me, where else can you get the following combination of investing conditions: A rock solid local economy 1 percentage point away from full employment (5.8%), high rental demand, minimal vacancy rates and rising rental prices, price to rent ratios on new (or less than 6 yrs old) properties under 8 and a steady and reliable local real estate market in full bloom? Not to mention that Texas is one of the most landlord friendly states with no state income tax that?s responsible for more job creation nationwide than most other states combined. There are other locations that do offer some of the benefits I just mentioned to investors but none that offer them all, like Texas.

Lately, I?m getting calls from investors who seem eager to engage in some ?amnesia investing? ? that?s when an investor forgets what just happened in that market just a few years ago and wants to risk his money in a location where history is sure to repeat itself. Examples? There are the usual suspects: Florida, Vegas, California and the like. Because prices there are off a gazillion percent from the utterly ridiculous highs of 2006. Here?s a piece of advice for you: Don?t fall for it. The price to rent ratios are still out of whack in every single one of those locations. In those markets, the fundamentals haven?t changed one bit and what?s puffing them up now is exactly the same culprit that did it last time. It?s merely the investors? expectation that prices are due to rise without any real economic underpinnings. Before you invest your hard earned capital in one of those markets ask yourself this: If the property you are buying would be worth exactly the same 10 years from now, would you still buy it? The answer is no and the only thing that makes that investment remotely plausible is the speculation of rising property values. Hoping to catch the wave on the way up is not a good investment strategy and there are droves of investors that discovered why just a few short years ago. What is a good strategy? Invest in a market where solid economics drives demand and returns aren?t dependent on price appreciation to get your goals accomplished. Invest in the real estate market that?s one of the hottest in the country for the right reasons.


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