Real estate no longer top investment choice for Americans

Real estate no longer top investment choice for Americans?  (Source: Housing Wire)

Americans are beginning to shift their investments to other areas as real estate fell not one but two spots from being the top investment choice back in 2016.

Americans across all ages said that real estate is their third pick for the investment of money they won’t need for more than 10 years, according to a survey by Bankrate.

The survey showed 32 percent of American prefer to invest in stocks, followed by 24 percent percent who say cash investments is best and 22 percent in real estate. This is down from 2016, when real estate was the No. 1 choice. In fact, Bankrate explained that this is the first time in four years that respondents didn’t favor real estate as their top choice. “For investment horizons of longer than 10 years, the stock market is an entirely appropriate investment,” Bankrate Chief Financial Analyst Greg McBride said. “Cash is not, and especially if you’re not seeking out the most competitive returns.”
The majority of Americans actually favor investing in the stock market, including 33 percent of Gen Xers, 38 percent of Baby Boomers and 44 percent of the Silent Generation, however Millennials favored cash investments. The survey showed 30 percent of Millennials said cash is their favorite long-term investment.

My concern: have people given up on their homeownership dreams? I am not sure this is the case. But the article was written in July of 2018, and the stock market was very high, and had been going up consistently.  We can safely assume this is not always going to be the case in the future, which may in turn change those stats.

See the whole article by Kelsey Ramirez, Reporter at HousingWire.  

Thanks for reading,

Francis

Home Valuation tool

Detailed, local trends etc...

Current mortgage rates  

A worthy local non-profit to remember: Second Harvest Food Bank Santa Clara County.

Investing in Real Estate - Where is it best?

Investor clients often ask me where it is best to invest in real estate, in the U.S.

This is a tough question, and there is no easy answer: it depends partly on the circumstances and needs of the client, whether the investor wishes to manage himself/herself, where you believe the best prospects for appreciation are, opportunity, future family needs?...

RealtyTrac puts out a good study on their web site (see "RealtyTrac study on rental condition") showing that the best performing markets for rental returns are:

Baltimore, Maryland:  24.82%, followed by:
Clayton, GA with 24.26%,
Wayne, MI: 21.08%,
Pasco, FL: 19.2% .....

The markets with the lowest return on investment are:

New York County, NY, with 2.34%, followed by:
San Francisco County, CA: 3.2%,
then Kings County/Brooklyn, NY: 3.63%,
Marin County, and close behind San Mateo County and Santa Clara County, at 4.31%
... and Santa Cruz County at 4.54%

Return on investment is defined in this study as gross return: rental price divided into the purchase price.  There is a lot more that goes into a more real "net" return: you have to take into account expenses, which include such costs as: - management company, - repairs, - vacancy, - taxes & insurance, - wear and tear on the house etc ...  More on this subject with this "net operating income" link, noted above.

This study does not look at the rental market from the point of view of someone who has owned a place there for a long time, just someone who would be buying right now, in the market as it is currently.  What I mean is that it does not take into account the appreciation of the asset in that location over time.  This can be a strong factor in the buying decision, and an unknown in the future.

Thank you for reading,
Francis

Silicon Valley real estate

Trends: Local prices and graphs.
A noteworthy local non-profit event:  Coalition on Homelessness, SF - ArtAuction15

Investing in real estate.

Investing in real estate -

I recently read an article from NewsGeni.us that I found quite interesting, dealing with real estate investing.

Without repeating the whole article here I thought I would comment on some of their points:

Their advice is:

Focus on promising areas - the clientele in the SF Bay Area has been well served by believing in the local area in the past 30 and 40 years. 5 years ago though a lot of people got scared and some sold, or did not buy when they could have.  For those who bought when no one believed in it, I say “bravo”!  However the Bay Area is just one choice, mostly based on price appreciation, not return.  Indeed until very recently, the return on investment was not great - purchase price very high, rental fairly low. 

I personally chose another route: an area with very little appreciation, but with traditionally good return .  With the help of an investor mentor (thank you Louis!), my family invested in real estate in Texas.  There, the gross return was more like 10 to 11% per year, as opposed to ~3% in the Bay Area at the time.  The area was promising because of the job market, which had been very consistent, and strong.  Since it continued to be strong, the rental market stayed strong.

Never spend more than you can afford - unless you buy cash, mortgages start to add up when you purchase rental properties.  You have to count on a few set-backs, like damage due to weather, vacancies, repairs tied to finding new tenants, etc…  if you do not have reserves, it can start becoming a stretch.  Plan on a certain amount of unknowns, and I would say, plan generally on costs being higher than they should be.  (like insurance costs….).

All of the advice is well taken in this article called “When is the right time for investing in property?” .   I would add another item: choose a good management company (if you are going to invest away from where you live, or if you do not plan on managing yourself).  This is essential to staying out of trouble, so-to-speak.  That company should be used to missed payments and how to deal with them, and they should be well organized and standardized in their procedures.  Getting referrals or testimonials is very important in my opinion.

If you are thinking about investing in real estate, share your thoughts with me - I’d love to help you out with what I learned so far on the matter.

Thanks for reading,

Francis

Silicon Valley real estate

Trends: Local prices and graphs.
A noteworthy local non-profit event:  Coalition on Homelessness, SF