Has your best chance at getting a great deal on your dream home or investment property passed you by?
The answer is no. But you certainly did miss the bottom — the intersection of low home prices and rock-bottom mortgage rates.
But it’s still a bonanza out there for prudent buyers! Real estate is still incredibly low priced, mortgage rates are still reasonably low and great wealth still can be earned from owning quality properties for the long term.
The most likely scenario where a real estate buyer increases his or her wealth — and “increasing wealth” is the reason most people desire to own real estate — is by holding property for the long term. When you own long term, you pay down your mortgage along the way, the property’s value hopefully will increase over the years and you skip the exorbitant transaction costs that go along with buying and selling real estate over and over again. So don’t buy a home or investment property unless you are virtually positive you will own it for years. You generally have to own a property for around 7 years to start earning any equity.
And keep this in mind: If you have that long-term ownership goal, the recent uptick in property prices shouldn’t be big a deal for you, because in 10, 15 or 20 years, the values should be much higher. In fact, in 15 years you’ll hardly remember what you paid today; you’ll just be bragging about how it was the best investment you ever made.
Buy good quality real estate
Beware: You can’t just buy any property and expect it will add wealth to your financial picture. You have to buy nice properties that are affordable to you — no get-rich quick schemes.
Many properties are wealth-draining, not wealth building. It’s usually the ones that sound like incredible deals, but they end up being too good to be true. A few types of properties that usually diminish your wealth are fixer-uppers, fancy prize properties, second homes, vacation rentals, land, properties in mismanaged homeowners associations, rent-to-own deals, and properties in bad areas. Most of those are going to be wealth-destroying for a variety of reasons.
To sum it up
The bottom has passed — a perfect storm of low prices and low interest rates is gone, gone, gone — but it’s still a buying bonanza out there for savvy buyers.
If you are buying a personal residence, buy a home you can afford. If you are buying rental properties, buy properties that pay for themselves.
Interest rates and home prices are still very reasonable — as long as you have a long-term ownership perspective.
Most importantly, don’t worry about what the news says and all the negative or positive commentary on the airwaves. Buy a great property for yourself, and you will hopefully enjoy the rewards down the road.
Read More From Zillow:
- What’s the Best Way to Earn Wealth in Real Estate?
- Is Homeownership a Good Choice for Young People?
- What Is Real Estate Due Diligence?
Leonard Baron, MBA, is America’s Real Estate Professor®. His unbiased, neutral and inexpensive “Real Estate Ownership, Investment and Due Diligence 101” textbook teaches real estate owners how to make smart and safe purchase decisions.
Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.