Q I know the real estate market is doing better than it has in years. Is it once again wise to buy property as an investment?

Michael Moulton, Michael Saunders and Company real estate agent says: Do I think it’s a great time to invest in real estate? Yes. Our inventory is at a 10-year low, and basic economics of supply and demand, as inventory gets so low, prices are going to rise again. It’s nationally forecast to rise 4 to 5 percent this year, and in low price points, perhaps more. During the downturn in the economy, there were short sales and foreclosures and a lot of rentals, so rental price is rising. Like any investment, you want a positive return, and if you have a mortgage or not, having a residual cash flow, with rising rents, makes sense. The thing to watch out for is if you look at a home worth $150,000 to $300,000, rents are different depending on the size of home. Make sure the thing cash-flows after property taxes, is insured and any repairs be made. Do your due diligence when you make a purchase. And being a landlord is an acquired taste; I am one and with phone calls to repair things and other issues, it’s not for everybody. I have had some tenants for five years who are great and had some tougher ones. It’s not easy kicking someone out of a rental home when they don't want to go willingly, but appreciation can cover a lot of things. It doesn’t serve any purpose for a home to sit vacant while you shell out utilities and property taxes. But rent carries with it a positive cash flow, and then it’s a real hit when you go to your portfolio of rental properties. If it wasn't smart to come buy rentals, why did Wall Street buy homes by the thousands in the last few years?

Charles Brown III, Insignia Bank Chairman and CEO says: You need to run numbers based on income potential and not purely on capital appreciation. When it comes to real estate investment, capital appreciation should be frosting on the top. We are seeing more investors buy on fundamentals—cash flow and what a property can produce rather than cash flow and capital investment that might come. Buy based on an income stream over a long period of time, not as a flip, especially since the big increase seems to have slowed.

Evan Guido, Baird Financial Services financial advisor says: Real estate has always been a great investment when purchased with moderate debt levels and operated with positive cash flow. When comparing national median home price appreciation to that of large-cap U.S. stocks, U.S. stocks outperform real estate handsomely on a cash basis. The comparison assumes no debt, carrying cost, brokerage fees, taxes or maintenance considerations. What this tells us is that stocks offer a similar inflation hedge without all the headaches. However, the edge goes to real estate and the true power is in the use of leverage and tax benefits that coincide with property ownership. Real estate investment involves a certain level of specialization and timing and has unique regional market considerations. Currently, the economic backdrop for certain areas of residential real estate is very accommodating. Our community is a hot bed for real estate speculation. I believe those buying quality properties with moderate debt levels and positive cash flows will be rewarded. Local investors’ access to real estate investment choices and analytical tools has never been better. A few ways to access real estate exposure are through REITs, (real estate investment trust), an ETF that follows an index of REITs, purchasing properties outright, or simply purchasing shares of real-estate companies or private equity funds that have been making significant investments into our local community. Publically traded REITs with annual yields ranging from 6-10 percent have become an increasingly popular investment for income seeking investors. Capital is cheap, making property acquisition more feasible. Additionally, the base of renters is ever increasing, as shown in Barron’s article “Renter Nation” and others highlighting the widening renter/owner ratio in the United States. Inflation is real; couple this with excess dollars in circulation, currently low interest rates, loan programs and a need for markets to increase property values to increase tax-payments to help run our communities. If the cost of sticks and bricks to build homes increase, end-user home price should rise as well, assuming there is an actual rental demand for the product, the component that was forgotten during the last real estate boom. Currently real estate makes a decent investment proposition compared to sitting on cash.


Contacts: Michael Moulton, Michael Saunders and Company, 941-383-7591; Charles Brown III, Insignia Bank, 941-366-7100;  Evan Guido, Baird Financial Services, 941-906-2829.