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The state of long term real estate investing – the perfect storm is here

The perfect storm for investing

If you’ve either dipped your toe into the real estate investment market, or are thinkin’ of divin’ in for the first time, I’m here to tell ya — you’re on the right track. In the 35 years since I transitioned to the investment side of the business, we’re now, and have been in the only truly perfect storm I’ve personally witnessed in my adult life.

What does that mean? 

It means the price/rent ratios are back to 1959 — literally. Can’t recall how many real estate investment books I read as a young man. I stopped reading ’em for one reason. You had to live in East Toilet Seat, Kentucky to find the stuff about which those books ranted and raved. Not a viable strategy. Now? There are a few regions offering those same price/rent ratios.

There are a precious few of these markets where there are astute builders puttin’ up 2-4 unit income properties. The only thing you should take away from that nugget is — brand new.

The news gets better

Some of those regions are governed by those who believe in capital investment, low or no income taxes, and are very pro business to boot. Also, the locations for many of these income properties are in the 8-10 range of quality.

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Then there’s the interest rate.  Investors in 1-4 unit properties are, and have been, payin’ just over or under 5%, 30 year, fixed. To give that some historical context, I submit my personal experience since being licensed in the fall of 1969. It took about three decades for me to see a freakin’ conforming owner-occupied loan with a rate beginning with a number less than a seven — literally. Yet today, qualified investors are lockin’ in loans at less than 5%?!

Two trends are icing on the cake.

As a consequence of some of these regions having become ‘destination points’ for people moving from other states, the supply/demand ratio has tipped in the investor’s favor. This has resulted in the simultaneous blessings of vacancy rates heading downward, while rents themselves are steadily either holding strong or rising.

As Dad would say, ‘This, Son, is a good thing.”

Real estate investors can now acquire new or near new 1-4 unit investment property in golden locations, with stellar price/rent ratios, while generating impressive cash on cash returns due to historically low interest rates, falling vacancy rates, and rising rents. Oh, and if you’re the owner of income property not in these regions, take the hint. You need to tax defer your equity the heck Outa Dodge, and you need to get it done around 4:30 yesterday afternoon.

There’s a technical term we real estate investment brokers employ when all these factors become reality simultaneously. It’s called a Perfect Storm. As I mentioned earlier, it’s the first one I’ve seen since I began doin’ this in 1969. I suspect it’ll most likely be the last I’ll see in this lifetime.

Invest now. Do it.

If you have the wherewithal to invest now, do it. Do it wisely, but do it now. Don’t be one of those geezers who’re always regaling whoever will listen about the time they coulda, woulda, shoulda, but never did.

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The state of real estate investing is very good indeed.

Written By

Jeff Brown specializes in real estate investment for retirement, has practiced real estate for over 40 years and is a veteran of over 200 tax deferred exchanges, many multi-state. Brown is a second generation broker and works daily with the third generation. With CCIM training and decades of hands on experience, Brown's expertise is highly sought after, some of which he shares on his real estate investing blog.


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