Hi Financial Survivalist,
I was wondering if I could get your take on a question I'm pondering over my financial situation. Right now, I have about $65000 in the bank and could probably get to $80,000K saved in the next year, if I continue living with my boyfriend. (His house is paid off).
I've thought about buying a house of my own, but real estate prices where we live are just outrageous (in my opinion), due to the low supply of houses.
I've seen houses in Florida and South Carolina which are nice for less than $200,000. I know I'll have to pay what the market dictates; what scares me is that I'll buy the house and then the prices here will "adjust" to incomes (they aren't even close now where I live).
I have a really secure job and have no concerns about income over the next 5 years. I AM concerned about inflation eating up my cash, and I know I should act on it now.
I just wanted to get your take on my situation. Do you think real estate is a wise investment at this point? I could either live in the house, or rent it out.
Thanks for your thoughts
A Concerned Prepper
Let me start out by saying I LOVE real estate. Also, as long as you have a Financial Survival Kit, it looks like you are at the point where you can start speculating a bit on your investments. Good job. It takes a lot to get there, and a lot of people never do.
1. When choosing an investment, the first step is to educate yourself. The risk of an investment is directly related to the ignorance of the investor. Make youself an expert before you invest and you can manage and minimize your risk. For example, you mentioned that your market may be a little overvalued. This tells me that you have taken the time to get familiar with that market. That's really good and very important. Also, my favorite real estate book for beginners is Wall Street Journal Complete Real Estate Investing Guide.
2. A home is not an investment. It is an expense. Even in the best markets, you will put so much money into maintenance, taxes, interest, utilities, insurance, updates, decorating, etc, that you will never get a good interest rate. Any one that says they have, probably didn't keep records every time they went to Lowes. The only way to fix this problem is cashflow.
3. When I invest in real estate, I do so carefully. I will never buy a property that doesn't cashflow and cashflow well. By doing this, my tenants pay all those expenses I just mentioned. On top of that it doesn't matter if the property value goes up or down, because I still make money on rental income. This way even in an overvalued market you can find good buys.
You can "invest" in a single family home, but if you have difficulty renting it you eat the costs. With muti-family properties, you can loose one tenant and still have others to pay your mortgage.
4. Take your time. There are more variables to inflation than just money supply. I think we still have at least a year, maybe two, before inflation really starts to pick up. The Fed will do everything in their power to prevent it. I aslo don't think the housing market is going to recover any time soon, if ever. Historically bubbles never re-inflate. I don't see why the housing market is any different. It will take years for income to catch up with prices and demand to catch up with inventory. However, there are good deals in every market.
5. The only secure job is one that you provide. If you still bend to the will of another person, they can lay you off at a moments notice. Please make sure that you have a Financial Survival Kit. Also, seek out other forms of income so that you are not dependent on a pay check.
I hope I have given you a good place to start. I apprecite the opportunity and hope I have helped. Let me know how it goes.
As always Be Smart and Thrive.
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