Is it time to get back into the market? Well it all depends. Yes it seems the market has slowed down a bit here in Connecticut as I cited in a previous post.
With that said, interest rates are still high (6.4%), and unlike other things that decreased (sales, and such) prices still increased slightly. Don't get me wrong if you want to buy in this market for personal use, I won't stop you, and I'll even help you.
This blog post isn't about buying for personal use, I am here to tell you not to buy an investment property. Let me rephrase that, don't buy a investment property, if you plan to take out a mortgage with these current interest rates.
I'll even go a step further, look at the numbers first, especially income (the going rents). If the rents are high, and the price of the house is low, then by all means go for it.
I recently looked at a property (duplex) for $220,000. As an investment buyer, you most likely will have to put down 20% as a down payment. In this example that would put your mortgage around $175,000.
For this property, when you add taxes and insurance, the payment is roughly $1688 a month. That will put you at just over $20,000 for the year.
Now most likely you'll have other yearly expenses on top of that, like water and maintenance. Lets just say that is an additional $4,000. That puts you at $24,000 for the year in expenses.
As for income, the listing for this particular property listed the rents at $975 a month each side. That is $1950 a month total, which ends up being $23,400 for the year.
Do you see where I am going with this? If you were to do the above, and buy this property, you most likely be losing money year one. The driving force of that end result, the interest you would pay on year one (over $11,000).
So unless you find a bargain, or you are buying with cash, I wouldn't purchase an investment property right now. However if those rents above where both $1200 a month, that is nearly $29,000, and actual profit.
The bottom line is if you plan to buy an investment property, you better know what you are doing, or you could be losing money right from the start.
If you don't know what you are doing, at the very least hire a Realtor, who does. I'm not only a Realtor, but a Real Estate Investor, who has been doing this for 10 years.
