There is a lot of uncertainty swirling about in today’s news. The coronavirus has left the U.S. economy shuttered for the better part of the year and now riots are raging across the country. On the surface, this might seem like the worst time to start investing. However, it actually might be a good time to get started.
Here are a few reasons why this is the perfect time to get started in real estate.
Why would you get started?
People get started in real estate investing for a few reasons. Usually, these reasons have to do with growing their new worth, diversifying their money, and earning passive income. When you start investing in real estate, the ideal scenario looks like this:
You have been saving $500 a month for a down payment on a rental property and after a year and a half, you have approximately $10,000. You close on a cheap property that generates another $500 in rental income after expenses. Now, in addition to your savings, you earn another $500 from your property. You’re now saving $1,000 per month and it only takes you 10 months to save another $10,000. You buy a second property that generates $500 per month. You’re now saving $1,500 per month. This process repeats an your income grows and grows.
Now let’s examine why now is a perfect time to get this ball rolling.
Due to the coronavirus and the potential threat to the economy that it represented, the Federal Reserve cut the interest rate to effectively 0%. What does this mean?
CUTTING THE INTEREST RATE means that it will now be easier for people and institutions to borrow money from banks. If you were thinking about borrowing money for a big purchase or business, this is a good time to do it since you can get away with paying less in interest. This strategy is used by the Federal Reserve to try and incentivize people to borrow and spend more money.
This means that if you take out a mortgage to buy a rental property, you’ll pay less in interest over the years.
Researchers at Zillow say that home sales plunged 44% in April 2020. The same researches are expecting a 2% drop in home prices by October 2020. This is bad news if you’re trying to sell but good news if you’re looking to buy! Recessions are generally a great time to buy because the market becomes flooded with sellers. People are anxious to sell their property which leads to great deals for buyers.
Identify the perfect time to invest
Believe it or not, poor market conditions can actually be a great time to start investing. Think about it like this: on Black Friday every year stores have huge sales and people rush to take advantage of the deals. The same thing happens during a recession but instead of shoes going on sale, it’s stocks. If you haven’t started investing your money yet, this may be the best time. You can start investing when stock prices are at their lowest and then just relax and watch your money grow over the next 10, 20, and 30 years.
The same is true if you’re already investing. Despite how it may feel at the time, recessions are actually a time to continue business as usual.
Be greedy when others are fearful
There’s a famous Warren Buffet quote when it comes to investing that goes “Be fearful when others are greedy and greedy when other’s are fearful”. Recessions are the best example of fearful investors. Everyone wants to sell their investments when prices of assets start to go down. If you have emotional discipline and some guts, you can make a killing at a time when most people are selling.
We hope that you’ve found this article valuable when it comes to understanding why this is the perfect time to get started in real estate! If you’re interested in reading more, please subscribe below!