realtorranjana.com http://www.realtorranjana.com/2012/08/how-to-generate-wealth-during-todays.html

Photo Credit: Fotolia.com

How To Generate Wealth During Today's RealEstate Market Turnaround

In the current real estate market,abundant opportunities areavailable for a home owner or afirst time buyer to generate asustained revenue stream fromreal estate that will last them foryears to come. Read on to learnabout the one real estate wealthgenerating strategy that youshould look into.

Real Estate Market InSummer of 2012

The local Bay Area Real Estatemarket in California, and many otherparts of USA's real estate market areshowing great signs of a recoveryamidst a gradual economic revival.The jury is out as to whether the realestate market is recovering or not,depending on where you live andhow crazy it got to in the last bubble. There may be lingering doubts about whether the economicrevival will cont inue into sustained economic growth and stability af ter the recent few depressingyears. But it is becoming increasingly clear that this is a RARE ONCE-IN-A-LIFETIME REAL ESTATETURNAROUND that you will see in many decades to come in your lifet ime.

The Ideal Real Estate Investor Of Today

Many of you may have bought your Bay Area houses during the peak and the low mortgageinterest rates of the last few years may have possibly helped your f inances become moremanageable in terms of payoffs of the big balances. If you have managed to build a reasonableamount of savings through stocks, and other investments over the years, you are now in a betterposit ion than many others in the market. And there are legions of long term home owners in the Bay Area who bought houses long beforethe peak with much of the mortgages paid down leading to a relat ively healthy f inancial situat ion.

You have built up other avenues to shore up your savings through a good combinat ion ofinvestment in stocks and other assets - hopefully :-) Your home values are now rising as you see your property tax assessments move up and yourlocal recent home sales data shows low inventory and many mult iple of fer situat ions withpropert ies selling at or above Home Sale List Prices. Besides, the number of Foreclosures or ShortSales in your area has rapidly diminished. And then there are f irst t ime home buyers who are t rying to buy their f irst home as a primaryresidence - there are some who are qualif ied for very good amounts allowing them to target$700K and above for a purchase. This segment of buyers could possibly look into the strategybelow to yield last ing revenue streams while also gaining rapidly in the form of capital growth. You all are the ideal real estate investors who can take advantage of today's rare marketopportunity.

Obvious But Not-So-Obvious Wealth Generation Strategy

If you have been owning a home as your primary residence, you are probably sat isf ied with whatyou have and can depend on your regular employment to produce your regular income stream. Ifyou are a f irst t ime home buyer with a loan pre-approval for a large amount, consider the upsidepotent ial for a large value home versus a couple of small homes - typically Condos orTownhomes. You should consider today's at t ract ive environment that could soon evaporate as the real estatemarket and the economy regains its steam. You have a rare opportunity to build a last ing revenuestream and generate capital growth in the next f ive-ten years through this approach.

Low Interest Rates That Won't Last Forever

The record low mortgage interest rates are not going to last forever - these are already showingsigns of bouncing back of f the lowest lows but at this point are st ill very low compared to the peakyears when people were willing to buy their f irst homes. As the economy recovers, so willinf lat ionary pressures that could be compounded by the worst drought in 25 years af fect ing foodprices.This factor alone could lead to higher interest rates let along the impact of growing def icitsand def icit -f inancing through Govt. bonds.

Rents Are Rising As Economy Grows

As the economy shows gradual signs of recovery, employment situat ion stabilizing, and growth inincreasing number of parts of the country, people who st ill cannot af ford homes or are vary of thecommitment of owning a home are choosing to rent. As a result , in 2012, rents for housing inapartments, condominiums, townhomes and single family residences have risen rapidly. One ofthe reasons some renters have turned into buyers in this market is in fact this rapid rise in rents.The current renters are future property buyers.

Home Prices Are Rebounding But Are At Historic Lows

Another factor to consider is that home prices although seemingly moving up near term, are not attheir historic highs from the crazy bubble peaks. In fact , many homes are at least 30% - 50% lowerthan their peak values depending on where you look. For instance, homes on the fringes of theBay Area were the ones that lost most of their value but have bounced back from the low values. Looking at various types of homes from condos all the way to single family homes to duplex units,you have a spectrum of real estate units you could look into for the right opportunity.

Invest Now For Lasting Returns - here's how

Real Estate Investors both within USA and from other parts of the world, including China, haverealized this rare opportunity and have been buying propert ies in the USA over last year primarilyas an investment vehicle. While some of the large foreign economies show signs of slowing, andthis t rend of money f lowing from abroad seems to have shown some signs of cooling, you have alevel playing f ield to invest today. Scout for a housing area which is in close proximity to medium to large employers and reasonablygood schools. Make sure you look for either an up-and-coming area or an at t ract ive neighborhoodfor future returns. Check out recent rentals in the area to get a sense of how much these unitsrent out for and their characterist ics, in addit ion to how long the units stay on market beforerenters sign. Consider set t ing a target of , say, $250,000 to $400,000 price range depending on where youtarget and your f inancial situat ion, assuming you can put down 20% - 25% - the rest can comefrom a low-interest mortgage or your exist ing home equity line of credit depending on yoursituat ion. Target to buy either a Condo unit , or a Town-home unit , and by all means, a Single Family Home ifyou have the f inancial wherewithal, in that reasonably good locat ion with proximity to goodemployers and schools. If you are a f irst t ime home buyer with a large pre-approval, split the same for two houses - one acondo and another a townhome. The condo unit can be rented out for very good rentals in theBay Area while the Townhome becomes your primary residence. The leverage from low interestmortgage outf low coupled with high rents and the tax deduct ion, leads you to a net incomestream for many years (assuming you t ied up a long term f ixed interest mortgage). TheTownhome, being your primary residence, now has a better cash f low management in that part ofthe mortgage payout on that home is paid for by the Condo rental. Thus, you have a far bettercash f low situat ion than what would have been if you had gone in for a large value single familyhome as your primary residence. Besides as years go by, you would have rapidly paid down theCondo mortgage freeing up equity for you for future investments in other real estate. In addit ion,capital appreciat ion in the condo and townhome units would be better relat ive to single familyhomes allowing you to move up to a great single family home in a few years with a much bettercash f low situat ion than most other large mortgage based home buyers.

Again, do the math in terms of the cash outf low of principal and interest and factor in the Taxdeduct ion you will receive out of the addit ional home mortgage interest you will be now paying. As described above, you now have the opportunity of cont inuing to stay in your current homeenjoying the peace and pride of home ownership, and also receive potent ially net income ofrentals over the mortgage payout and tax benef it of the second home. In addit ion, the lower pricesegments tend to register better longer term returns as the economy and market improves beyondthe turnaround. At this juncture, you have a rare wealth generat ing opportunity with the above combinat ion ofevents helping you get real returns over several years.

Ideal Places To Invest

If you would like to get help with the above strategy, don't hesitate to contact me for placeswhere you can invest for a possible addit ional income stream with potent ial future capitalappreciat ion. Contact me at (408) 861-8026 or through the handy form on the right hand sideof this page!

Author Ranjana Shreedhar, Realtor:If you are planning to Sell your house, learn how to make the most for your house inthis market and to attract the best offers for your valuable property. Call me for a no-obligation evaluation, and a listing presentation at 408-861-8026.If you are in the market to buy or invest in a home, learn how I can help you findyour ideal home for primary or secondary residence, and be there for you throughoutthe purchase process.If you or any of your friends are in the market to sell or buy a home in the Bay Area,I'd be delighted to help you or your friends, as the case may be, achieve your realestate goals with exceptional service, high integrity, and market savvy. Contact me through Email or on phone (408)861-8026 or through the handycontact form on this page.

Posted in: