Back to Basics!
The booming real estate market we had in the last few years involves a lot of real estate speculators besides the real home buyers. Buyers paid "Future Value" on the pre-sale project HOPING to make profit on top of the price they paid. A lot of the buyers bought more than one units in different projects around town expecting to make quick profit by completion day. Since our market is not allowing those buyer to make their "expected" profit, they either have to prepare for the down payment & complete on the deal or I have heard some just want to get their money out by assigning the contract over to a new buyer who will complete deal. This is a perfect opportunity for the real home buyers & the long term investors who have the financing arranged and are ready to buy.
Back to basic investment formula which is if you are able to put 25% down payment & the rent covers 75% financing then that qualifies as a good long term investment. Remember, the mortgage is being paid off, giving you approximately 4%-5% return on your down payment which is greater than you putting your money in the term deposit. Another formula is if the property produces a net rental income equal to a minimum of whatever the prime rate is ie 4.75%, of the purchase price, then that's a good long term investment property. Example: purchase price $500,000 yearly net income would have to equal or be greater than $25,000 or $2,100 per month.
If we had a crystal ball telling you the US economy is going to regain its momentum after the election, would you go to buy now? Well, a survey was being done in the States was posted on July 22nd, 2008 in RIS Media. It shows real estate expected to improve with a New President. 48% of the women and 41% of men plan to buy a home in the current market said they think the housing market will get better once the new President is in office. As I said last week, everybody react on the media. Bottom line is if you need a roof over your head, don't try to time the bottom of the market. If you are investors, do your calculation.
