Vail Daily column: Time to get back into real estate?
Ask a Realtor
Dear Joan,
I have been renting since I lost my home in the 2009 economic downturn in the Vail Valley. My friends are all encouraging me to buy another home, now that I can, but I have been a little soured on the whole real estate investment idea since my foreclosure. I guess I would like you to give me some encouraging words about real estate, since I have decided I am even less knowledgeable and trusting of Wall Street investments. Any good information to help me get back in the game?
Dear Sidelined,
Real estate, much like other investments, usually needs to be for the long haul to be safe. If you buy property with a mortgage that is dependent upon you receiving your top paycheck for now and every month for the next 30 years, and if you don’t get the full paycheck you are immediately in default, then you have made a risky investment, no matter what the market looks like. If you are able to buy property that you can easily afford and you are able to keep a financial cushion, then I personally don’t know of any better place to put your money.
If you look at the average price of a home in Colorado in 1983, it was about $78,000 and would rent for about $387 a month on the Front Range. The statistics show that Front Range homes and condos now have an average price of $400,000 with an average rent of $1,700. Our valley has similar ratios on a little higher scale. What other investment can you count on that will quadruple your money in 30-plus years or more than quadruple your income payments if you have your property as a rental investment?
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Plummeting Interest Rates
On top of this, interest rates have plummeted to less than a third of what they were in the last 30 years so your carrying cost have dramatically dropped. Now if you do a mathematical example it gets even better. If in 1985 you paid $80,000 with $16,000 down and did a loan for 30 years and now you have paid off the home and it would sell for $400,000, then you actually have made approximately 25 times your original investment and had the home to use and enjoy and had interest and tax write-offs along the way! The trick here is to make sure that you can hold on to the property for the long haul so that you don’t get caught having to sell in a down market, like you did last time.
Be In it for Long Haul
Could you sell sooner than 30 years in an up market and make money? Yes, of course, but being able to stay for the long haul gives you as much security as possible on a large investment. Find yourself a knowledgeable, caring Realtor to help you look at the possibilities and run some numbers for you. Interest rates are still terrific, so give it another chance. Best of luck to you.
Joan Harned is an owner and broker for Keller Williams Mountain Properties and heads up Team Black Bear, her own real estate team. Harned has been selling real estate in Eagle County for 27 years, is a past chairman of the Vail Board of Realtors, past Realtor of the Year, past director on the Great Outdoors Colorado Board and a member of the Luxury and Land Institutes. Contact Harned with your real estate questions at Joan@TeamBlackBear.com, 970-337-7777 or http://www.SkiAndTeeHomes.com.
