Current Mortgage and Real Estate Concerns…and Opportunities
March 8, 2008 – 8:23 amIf you have turned to the news at all in the last year, you have undoubtedly seen the large number of foreclosures and falling home prices throughout the nation. Due to previously booming years of housing price increases and easy credit underwriting, a bubble was created that was sure to burst. Now that the bubble has done just that, many are concerned about what to do next.
As with any major shift in the market, a number of great opportunities are created by the current state of affairs. If you already own Real Estate or are planning to buy, then the fact that rates are hovering between 5.5 and 6% for fixed rate 30 year Mortgages (see Freddie Mac) should bring refinance options to mind. With rates at these levels, refinancing may make sense, but you should do some research first. In order to determine if you will save money by refinancing at current rates, you should consider the terms of your current loan (interest rate, monthly payments, years into amortization schedule, etc…), the terms of the new loan (remember to evaluate all loan and related fees), and the amount of years you plan to reside in the home.
An investment opportunity may also exist in the current real estate market. Because many homeowners are now unable to qualify for financing under the new underwriting guidelines, they are forced to rent. If you have sufficient credit to qualify under the new standards, then becoming a landlord is becoming more and more attractive in some areas of the State.
Becoming a landlord has serious considerations though. Not only do you have to evaluate the projected monthly costs of maintaining the property, you must also be able to calculate the average rental rate (including vacancy periods). Additionally, there are a number of liability concerns when renting to a tenant that should be reviewed, although these liabilities can usually be controlled with proper entity formation and insurance policies. You should be able to answer all of these questions and have a solid business model before entering the landlord market.
Yes, the current market is troubling, but there are still opportunities for success. With careful planning, caution, and research, being succesful in the real estate market remains possible.
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