Should You Invest in Real Estate Today?

07/19/19 • -1 min

Given that today’s market leans heavily toward sellers, should you invest in real estate? The answer is yes, but not without following these tips.

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Our current market is booming with activity and inventory sits at an all-time low, which is leading many of my clients to wonder if there are still opportunities to invest in real estate despite the definite seller’s market we’re in.

Admittedly, as someone who’s almost always investing in real estate, I can tell you that opportunities are harder to come by when the market favors sellers so strongly. Still, that doesn’t mean there are none whatsoever. With the right guidance and drive, you can find a property worth investing in, and today I’ll offer some tips for doing so.

Your priority when venturing into the market should be to look for a property that you know will break even. You can’t break even on a property if you’re having to bring money to the table each month.

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There’s no limit to the number of properties you can invest in, as long as they have a positive cash flow or are breaking even at the very least.

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As a general rule, most people invest in real estate for one of two reasons: to generate cash flow or for appreciation. It’s not often that you’ll find a property that both appreciates and generates considerable cash flow.

As many of you know, my wife and I own property in Maryland, Virginia, and D.C. The properties we own in Baltimore have yielded double-digit cash flow, but over the last 10 to 12 years, they haven’t appreciated at all. Conversely, my properties in Virginia have hardly produced any cash flow, but their appreciation is soaring—6% to 8% annually.

Another tip when you’re out looking for an investment property is to try and stay under $400,000. Investing in a $1.3 million home in Arlington might sound like a good idea until you realize that the rent you charge will eventually cap out somewhere around $4,000 to $4,500, which won’t be enough to cover your mortgage, taxes, and the costs associated with finding a new tenant. I strongly caution against purchasing above the $400,000 price point if you don’t want your investment to become a financial liability.

Now, there’s no limit to the number of properties you can invest in, as long as your properties have a positive cash flow or are breaking even at the very least. However, without a constant stream of cash flow, you’ll end up sinking your cash into them month after month, and those are dangerous waters to be in.

If you have any further questions or you’d like to hear more of my tips on investing in real estate, please reach out to me. I look forward to hearing from you!

Buying a home? Search all homes for sale

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There’s no limit to the number of properties you can invest in, as long as they have a positive cash flow or are breaking even at the very least.

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Previous Episode

The National Market Is Shifting, but Are We Shifting Along With It?

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If you’ve been paying attention to the latest nationwide market statistics, you might’ve noticed that in many areas around the country, we’re shifting from a seller’s market to a buyer’s market.

In our Northern Virginia/D.C./Maryland area, however, we’re still in a seller’s market.

Let’s recap some year-over-year statistics from this past September. In Virginia, the average days on market was 39 days, which was a slight drop compared to September 2017 (41 days). In D.C., the year-over-year average days on market rose from 36 to 37 days. The total number of closed sales for detached units from all three areas dropped 12% to 15%.

This means there are fewer buyers out there, and what’s going to start happening in the next several months because of this is that inventory will climb. In fact, I think we’ll have more inventory next spring than we’ve had in the past three or four years.

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I think we’ll have more inventory next spring than we’ve had in the past three or four years.

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If you’re thinking about selling, now is the best time to do it—don’t wait until next spring. If you’re a buyer, you should also think about buying now as well. Although inventory is down about 45% overall in our area, you can lock in a lower interest rate if you buy now. Currently, the average interest rate is 4.6%, which is almost a full point higher than where it was at this time last year. If you’ve been paying attention to the latest nationwide market statistics, you might’ve noticed that in many areas around the country, we’re shifting from a seller’s market to a buyer’s market.

In the meantime, if you’re thinking of buying or selling a home or you have any other questions, don’t hesitate to reach out to me. I’d be glad to help you.

Next Episode

Real Estate Market Conditions in Northern Virginia, D.C., and Maryland

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For this market update, I’ve compiled the data from the Northern Virginia, D.C., and Maryland real estate markets because all of the numbers are so similar. Here’s what you need to know.

Let’s start by looking at what the real estate market is doing today. The median sold price in the D.C. Metro is up by 2.91%. Although there is a 17% appreciation rate right now in Arlington, it’s from a much smaller sample size.

The average days on market is down by 18.97%—from 58 days to 47 days. You might think 47 days is a long time, but this statistic takes into account luxury homes, which typically take much longer to sell.

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Our inventory remains at an all-time low.

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For attached units such as condos and townhomes, their closed units are down 3.27%. The sales for detached units, or single-family homes, is up by 3.07%.

Our inventory remains at an all-time low, sales have remained steady, and homes are still appreciating at a steady pace. Affordability, however, has taken a bit of a toll on the market as well as an uncertain economic future.

Keep in mind that most recessions are typically good for real estate markets. With the exception of the last recession, which was caused by real estate, home prices have appreciated during recessions many times in the past.

If you have any questions for me about the market or about real estate in general, don’t hesitate to give me a call or send me an email. I look forward to hearing from you soon.