Great Investment Property Deals in Short Supply

Savvy investors know when to hold 'em. They also know when to walk away and know when to run.
The best advice: You've got to count your money.
That's what Richmond, Va.-based real estate agent Apryl Kay advises all of her investor clients.
Being aware of just how much an investment in real property will cost is even more important now with prices at record highs -- thus making investing more of a risk and less of the sure bet it has been in the last couple of years.

Kay, who has bought, sold and rented property in Texas and in Virginia for her personal investment portfolio for 16 years, has professionally helped others do so since 2002.
Investors must count money going out and hope it is offset by the money they hope to bring in, Kay says. This includes knowing not only the loan's interest rate, but being able to estimate taxes, insurance, utilities, maintenance, advertising for tenants and other business costs. If the plan is to hold on to the property as a rental, investors should also know how much they can charge for rent in the area.
Keep on walking"You need to do research," says Kay, a top-selling agent with Napier Realtors ERA. "If the numbers don't work, walk away."
One of Kay's clients has done just that -- several times.
"We've looked at about 30 homes since Christmas,'' Kay says. Since then, they've put in eight offers. Most were rejected because Kay's buyer offered below the asking price, trying to make the numbers work.

Because of higher prices in the Richmond area, it has taken them some time to find an acceptable investment for the client. But their persistence paid off. Now, after months of shopping, Kay and her client think they've finally found their deal -- actually three deals. Her client has contracts pending on three single-family homes.
Kay says it is harder to find an investment property that will allow the buyer to charge enough rent to cover the mortgage or even fix it up to sell it for a profit. People who bought before the run-up on housing prices had more options, less competition and more room for profit. With housing appreciating so quickly in recent years, investing in real estate appeared to be a no-brainer, which made the market tempting to neophytes.
"We've gotten so spoiled," Kay says. "The investment property market hasn't replenished yet. The supply is just not there like it used to be prior to the housing boom."
But Kay says her investor clients only dive in if they determine it makes good financial sense. "Some investors get emotionally involved,'' Kay says. "This is business."
And it's a business more and more people want to get into.

In 2005, more than a quarter of all homes purchased were bought as investments, according to the National Association of Realtors. And, even as prices continued on their upward trajectory, sales increased. Last year, there were 2.32 million investment-property sales, up nearly 16 percent over sales in 2004.

An NAR survey of investment property buyers found that 55 percent of those who bought a house as an investment did so for the rental income, and 35 percent said they bought to diversify their investments.- advertisement -
The average cost of an investment property in 2004 was $148,000. Last year that price tag jumped 24 percent to $183,500.
"Investment home sales are likely to decline this year, in part because of higher interest rates," David Lereah, NAR's chief economist said in a release. "There are fewer incentives to speculate in the market with price appreciation cooling in much of the country, and more oversight is being encouraged in the mortgage market."

The early bird catches the deal"Anytime you see a run-up in any market, it's generally true that the people who enter the market later are more likely to get hurt," says Paul Bishop, NAR's manager of real estate research.
Also, with real estate being such a sure bet in the past few years, investors who didn't do their homework weren't punished as harshly because properties nationwide continued to appreciate rapidly. Those early buyers were confident that there would be a pot of gold when they sold.
"They went in thinking they would make money on the other end of the deal," Bishop says, even when they bought high and the property lost money on the monthly rentals. "There is evidence that the overall housing market is slowing a little bit. It's harder and harder to justify that type of deal.
"This is where you separate the experienced investor from those getting into the market a little too late. Returns for latecomers aren't going to be as good -- unless they have resources and the fortitude to stick it out."
Jim Lofgren, executive director of the Rental Housing Association of Sacramento Valley, says with more potential investors eager to park their money in a house, finding one worth the risk is more difficult.
There is "a lot of competition" for the good investment properties, Lofgren says. "It's tough to find a good bargain out there.
"It is really important for investors to determine: What is their investment strategy? If you're looking to make money real quickly, you'll have a tougher time in the market now," he says. "There's not the appreciation there once was. This is a market where people are looking to the long run."
Lofgren's co-worker, Cory Koehler, has that long-term mentality when it comes to his pending investment purchase.

Koehler, deputy director of the Rental Housing Association of Sacramento Valley, planned to close on his second rental property -- a single-family home -- the first week of May. Both of the homes Koehler rents out are in Sacramento County, Calif.
Spending money to make moneyAlthough Koehler thinks he will not have a problem finding a tenant for the new house, he says he will have to give out of his pocket "several hundred dollars" to make up the difference and pay the mortgage. That, of course, doesn't include all of the other costs of homeownership, plus possibly carrying the entire mortgage if the property is vacant.

However, Koehler says with all of California having pricey real estate, he didn't have much of a choice but to get into the market.
"The market is quite high and the rental market is quite soft," Koehler says. "The appreciation on real estate in the last three to five years is in the double digits."
Since real estate has been so tempting, more renters flocked to becoming homeowners, eroding the tenant pool, he says.
Koehler is counting on the house appreciating and area rents rising. "I'm willing to be patient," he says.

Karen Peninger, a real estate agent with F.C. Tucker/Emge Realtors, based in Newburgh, Ind., who also owns investment property, says there are still deals in the Midwest.
"We get a lot of transient people in this area, and when they come from New York, New Jersey or Pennsylvania, they're able to buy more for their money,'' she says.
People realize that real estate is a good way to invest, says Peninger, who has been a real estate agent for three years and has worked with her husband's building company Homes by John Peninger since 1980.

Brucetta Williams, who owns a four-unit building in Washington, D.C., and a single-family rental in Baltimore, is currently searching for a deal.
Williams is looking for another house to keep as a rental, and she has walked away from deals where she couldn't make a profit.
"I don't want to overpay. I'm looking for a deal and there are very few out there," she says.
In this market, finding a deal requires hard work and a lot of times, a connection -- such as a neighbor who will advise you of a potential sale, Williams says.
"That's the only way to find things priced appropriately. There is a certain amount of overpricing," Williams says. She refuses to get caught up in the market frenzy that has overconfident sellers believing they can "put anything on the market at any price."
Don't buy at top of market"You just have to be careful," Williams says. "Make sure you're not buying at the top of the market."
But, Williams sees good news in the real estate market now.
"The prices are leveling off. They're not spiking as much as they were over the past couple of years," she says. "There are a lot of 'reduced' signs."
Compared to the housing market a few years back, Williams says the current market is like "night and day."
"When I bought my first house in 1998, it was very much affordable for me," she says. "Now if you look at anything under $250,000, you find only one-bedrooms in neighborhoods you hope will change."
source from : bankrate.com