As the Obama-Romney race approaches its final stretch, we thought we would get our two real estate investment cents into the discussion. Which one of the two would be better for real estate investors? That depends. If that sounds much like a politically correct answer – it really isn’t. Here is one element that impacts real estate investing – interest rates. Lower interest rates stimulate home buying and that in turn should lift real estate prices. Rising real estate prices mean appreciation for real estate investors but may also change the dynamic of the cash flow markets. If the rents don’t keep pace then the monthly cash flow return from investment real estate will fall. But investors should be able to make that up in appreciation which hasn’t been there since the housing bubble burst. The Fed is committing to lower interest rates so that is likely to stay regardless of who gets elected.
Do Interest Rates Matter?
These interest rates don’t mean much if people can’t get loans – much like a restaurant with a great menu who won’t serve you if you are even slightly overweight. Only thin people can eat. Only people with pristine credit can get loans. Why? Because the banks are running scared. Some of them are having to buy back loans from many years ago for reasons that they don’t feel are so fair. So they are heavily focused on covering their … you got it. Regulators on the other hand don’t want another housing bubble with easy money. The smaller community banks are feeling the biggest squeeze – they have been the cornerstone of local small business lending. So small businesses are feeling the pinch which in turn makes employment uncertain. Which will cause more people to rent. So the answer is a mixed bag, or as we said earlier, it depends – on which candidate swings the pendulum back a little to allow for some level of risk taking again.
But you really can’t lose by jumping in now and investing in rental real estate. You have to be in it for a little while. All this will pass and your rent checks will still come in if you have picked the right investment. For that, go with HomeUnion®.