Buy, sell or hold?  A guide to investing

REAL ESTATE INVESTING
PART 1 OF 3

 

Three-part series focusing on strategies for today’s investor

NEXT SUNDAY: Criteria for selecting an investment property

Hawaii’s boomers find today’s market ripe for investment

 

HONOLULU ADVERTISER   March 11, 2007

 

BY LISA SCONTRAS

 

Custom Publishing Group

 

 

Think the real estate investment market is over? Not so fast.

 

 

Demand for rental housing continues to grow, creating excellent opportunities for forward-looking investors to supplement their retirement portfolio with rental income, according to Jodee Farm, partner at Prudential Locations LLC.

 

“I think investors are taking more responsibility than they used to for their retirement future,” says Farm, who cites dissolving pensions and changing times as motivators to become more financially self reliant. “Real estate is a real great way to do that and diversify all at the same time.”

 

Although the pace of residential real estate has slowed from the intoxicating free-for-all that characterized the past five years, February statistics released this week by the Honolulu Board of Realtors show prices for both single-family homes and condos have held steady.

 

The stabilized market is calming jittery sellers and prompting buyers to act while there is still a respectable assortment of inventory to choose from. The fact that Oahu’s economy is strong and that interest rates have remained low may make conditions ripe for investing in a rental, according to Farm.

 

And while some local investors are buying fixer-uppers to flip for a quick profit, she recommends thinking more long term — a strategy to bring in additional income after retirement. “I recommend holding in this market,” says Farm. “I would say that at least 75 percent of investors purchase (real estate) to supplement their retirement income or as a retirement home.”

 

Opting to hold real estate long term and not to gamble on the quick buy-and-sell alternative also suits the low-risk tolerance of those approaching retirement age.

 

According to the National Association of Realtors, the most frequently cited motivation for purchasing a second home is to diversify an investment portfolio. One out of five second-home purchases will become primary residences after retirement, 28 percent of buyers seek cash flow from rental income and overall, 92 percent of these buyers see their property as being a good investment.

 

Why is it then, that only eight percent of boomers own a rental property? What separates the actual real estate tycoons from those who are just wishful?

 

“The biggest obstacle toward taking that all important giant first step towards being an investor is fear,” says Farm. “Knowledge can do a lot towards alleviating that fear.”

 

Am I getting in over my head? Is the timing right? How do I get started? These are all normal questions budding investors ask themselves.

 

Remember, those same tried-and- true strategies that got you through the process when you purchased your primary residence, apply when you’re considering an investment.

 

Getting pre-qualified cannot be overemphasized, according to Farm, because it tells the would-be investor just how much home they can afford. Because a critical part of the investment process involves crunching numbers, knowing where a buyer stands financially can alleviate a lot of the fear.

 

Next, she recommends looking for something that is priced right and in a decent neighborhood.

 

“Remember, location, location, location,” says Farm. “And start small. Buying something that is moderately priced is a lot less scary and a good way to get your investment portfolio started.”

 

 

back to Helpful Articles for Buyers