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Is Now a Good Time to Buy a House??

Monday, July 14, 2008 posted by Tommi Crow


A frequent topic of lunch and dinner conversations these days is whether or not it is a good time to invest in real estate.    And, the answer to that question is “It Depends”.

“It depends”… on what time and investment mean.    

If you are attempting to time the market, you are actually speculating that price levels have reached a bottom and  that they will go higher in the near future.   While buying on price speculation is fine and can be highly profitable, smart speculator’s realize it is also risky.   Since no one truly knows the exact time that property values will reach their lowest level, smart speculators should gamble only with money they can afford to lose.

Investment, on the other hand, is analyzing each situation or property on its own merit to determine a good value.   And, while no one wants to pay too much money for a property, timing the exact lowest price point isn’t what the investor is focused on. 

So, what is the investor looking for??  What determines a good real estate investment??   

Many people believe that their home is an investment.   It can be, but it is probably not.  Unless you plan to rent out rooms, or use your house in a way that generates more income than expenses, it is not an investment.  It is where you live.

The only way to determine investment versus speculation, is to look what the property would rent for versus the cost to own it.   If the property would easily rent for more than the monthly mortgage, taxes, insurance and expenses, it qualifies as an investment.    If the monthly costs exceed the rental income, then the buyer is speculating and paying a premium to own the home.

Bottom Line:  Rent equals Value. 

If you’re a value shopper looking to purchase a home as an investment, don’t buy a property, if you could rent it for less money.   While buying a home from the heart is fine, remember that anything you pay above the market rent is not an investment.  It is speculation or self-indulgence.

The next time the dinner conversation turns to real estate investment, impress your friends and explain the difference between investment and speculation… 

Will they understand….it depends.

Thank you for visiting   If your dinner conversation happens to turn to real estate, please tell your friends about us.  We really appreciate it.