If you haven’t heard, the smart money is buying real estate right now. Approximately one third of the sales nationally as well as in Orange County are investors purchasing either investment property with the long term in mind, that equates to consistent cash flow, or investors purchasing properties to flip for short term gains. Long term investors will benefit from a nice cash flow right now in addition to rising rents in the future plus appreciation at some future date due to a fixed supply of housing in Orange County with very little new building occurring. Flippers however are only benefiting from the immediate purchase, rehab and turning of properties. Real Estate Investment Trusts (REIT) which fell out of favor for a while back are starting to look attractive again as rents begin to rise. Rents will rise due to several factors including individuals that have lost their homes to foreclosure or short sale will become tenants for possibly a long time due to the fact that they cannot qualify for a new loan and maybe do not want to be responsible for a mortgage after having gone through the process of losing a home. Others will remain tenants due to the strict lender underwriting standards these days and inability to qualify for a new loan. And even though we have some of the most favorable affordability ratios in this generations history, some buyers will not purchase because they are unable to get off the fence and make a decision. They are like a deer frozen in the headlights allowing the opportunity of a lifetime to pass them right by.
Many in the investment community are starting to get concerned about their stock portfolios and commodity investments making a revisit to recent downturns and are expressing an interest in moving at least some of their eggs into real estate basket. After all, real estate has taken such a big hit in the past three years that the chance of it going significantly lower is very remote at this time. At some point real estate has a certain utility value, rental value for instance and replacement value, where the price will not go any lower. We are near that point right now based on cash flow and return on investment. So I will reiterate, THE SMART MONEY IS BUYING REAL ESTATE right now!
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