Throughout history, real estate investments have been reserved for the wealthy, since it has always been considered that successful real estate investment involves great sums of money. Certainly we are talking about large sums of money in the asset value of any real estate investment. However, like the family home, it does not require huge sums of equity money to buy. All financial institutions, as well as private sources, are readily prepared to assist with financing. Lending institutions will lend more money on real estate than any other commodity. Other people's money is always available to use when we want to buy real estate.
Over the years, there has been talk of real estate booms and recessions. We are in a boom market now on the Peninsula. Income-producing real estate, like all forms of investments, has its ups and downs. However, if you look at the long term, real estate just keeps increasing over the years. More in some areas than others. Many investors say they do not know if they prefer booms or recession markets in real estate because there is money to be made in both. It is always a good time to invest. In recessions, prices are down and financing can sometimes be easier to obtain with excellent terms because of reduced demand. In boom times, the investor cannot lose because of fast-rising appreciation.
Inflation is one of the primary reasons real estate prices increase, but there are many reasons why property values grow. In our opinion, four essential factors need to be considered when looking for an investment for its future capital appreciation. One simple adage is that there are only three factors; location, location, location. This is true, but it is also an oversimplification. The four essential factors are; scarcity, inflation, improvement, and higher use.
On the Peninsula we are going through a period of strong rental demand and a limited supply of available rentals. The result is dramatically increased rental rates and, consequently, increased property values.
In addition, the very limited supply of available investment properties has resulted in very strong upward pressure on prices. And it appears that this trend will continue for the foreseeable future.
When are you going to start to build personal wealth and financial security? Everyone has to start somewhere. The personal home comes first, then income-producing property. With the proper guidance and negotiating skills of a real estate professional, you should start now or add to your existing real estate investment portfolio.
This article was published on Sunday, May 10th of 2015 in the San Francisco Examiner.
Articles are written by Eric Ruxton and Larry Aikins, owners of Terrace Realty, Inc. and Terrace Associates, Inc. in Redwood City. Terrace has been in business more than 55 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.