Is the Time Right for Investing in Income Property
Understanding the right time to buy is crucial when contemplating any type of investment, but it is also important to note that income property does not always follow the trends of other investment types.
The way in which income property is acquired affects the success of the investment more than the time at which it is purchased. This is due to reliance of income property on economic fluctuations. In present circumstances this is overtly apparent as the government's expenditures continue to surpass revenues in response to the recession.
In the current recession, money is being printed and spent well in excess of the country's revenues, which has a significant effect on the terms surrounding a purchase.
Past recessions have always made a full recovery and the severity of the most recent recession is an indication of how bad the next will be. Recessions that take longer to recover will result in higher levels of excess.
In assessing the past 20 recessions, the average number of months between peaks is 59 with the most recent lasting 81 months. The average length of time between peak and bottom is 14 months. Based on this information and fact that the current recession is in its 20th month, investing in income property at this time would be a wise decision.
As far as the stipulations of how the income property is acquired, certain aspects must be addressed to ensure the purchase is set up correctly. Unsuccessful investors fail due to poor due diligence, negative spread, excessive debt, bad financial terms, and negative cash flow.
These problems are discussed in many past articles featured by NetGain and their resolution is crucial to the success of an investment. The upside is that in today's market, the existence of excessive currency in circulation brings opportunity for investors to take advantage of higher interest rates and inflation. Structured properly, a real estate mortgage allows the investor to repay a loan with money that is less valuable than that which was initially borrowed.
The key is to negotiate the mortgage correctly using the following guidelines: -Interest Rate: Should always remain fixed -Term: 20 years or more -Due Date: None -Mortgage should be eligible for gradual liquidation or prorated write-off -Debt should be non-recourse -No lock-ins over one year -No pre-payment penalties over 1.5% -Eligible assumptions will be accepted
Today's economic environment presents an attractive investment opportunity for acquiring income property. Considering the key components discussed in this article will ensure that the transaction goes smoothly and the investment is set up for success.
The way in which income property is acquired affects the success of the investment more than the time at which it is purchased. This is due to reliance of income property on economic fluctuations. In present circumstances this is overtly apparent as the government's expenditures continue to surpass revenues in response to the recession.
In the current recession, money is being printed and spent well in excess of the country's revenues, which has a significant effect on the terms surrounding a purchase.
Past recessions have always made a full recovery and the severity of the most recent recession is an indication of how bad the next will be. Recessions that take longer to recover will result in higher levels of excess.
In assessing the past 20 recessions, the average number of months between peaks is 59 with the most recent lasting 81 months. The average length of time between peak and bottom is 14 months. Based on this information and fact that the current recession is in its 20th month, investing in income property at this time would be a wise decision.
As far as the stipulations of how the income property is acquired, certain aspects must be addressed to ensure the purchase is set up correctly. Unsuccessful investors fail due to poor due diligence, negative spread, excessive debt, bad financial terms, and negative cash flow.
These problems are discussed in many past articles featured by NetGain and their resolution is crucial to the success of an investment. The upside is that in today's market, the existence of excessive currency in circulation brings opportunity for investors to take advantage of higher interest rates and inflation. Structured properly, a real estate mortgage allows the investor to repay a loan with money that is less valuable than that which was initially borrowed.
The key is to negotiate the mortgage correctly using the following guidelines: -Interest Rate: Should always remain fixed -Term: 20 years or more -Due Date: None -Mortgage should be eligible for gradual liquidation or prorated write-off -Debt should be non-recourse -No lock-ins over one year -No pre-payment penalties over 1.5% -Eligible assumptions will be accepted
Today's economic environment presents an attractive investment opportunity for acquiring income property. Considering the key components discussed in this article will ensure that the transaction goes smoothly and the investment is set up for success.
About the Author:
Allen Cymrot is a veteran investor and strategy consultant for real estate investment. His investment principles and cap rate recommendations can be found at http://www.netgainrealestate.com This and other unique content '' articles are available with free reprint rights.