Why the second half of 2015 is ripe for the savvy investor

If there has ever been a more compelling reason for a savvy investor to get in or get out of the way, today’s investing landscape has defined it.

Here is what is going on:

• Record low interest rates are threatening to rise.
• The demand for rental housing continues to grow.
• Many markets are still undervalued.
• Home prices are on the rise.

All of this positions the second half of 2015 is a time to get serious with your investing decisions

In determining what the last half of 2015 will look like for investors, I believe one needs to look no further than the evidence of growth in the landlord/tenant business.

4 key factors fueling tenant growth

1. An Urban Institute report states that over the next 15 years homeownership rates will continue to decline, which will increase demand and competition in rental housing.
2. An estimated 4 million new rental households will be created over the next 15 years.
3.  A total renter base of 22 million households will need housing.
4. There will be 20 million new seniors over the next 15 years, and many are opting to rent. As their millennial children are finally leaving the house, those children and the baby boomers themselves are finding comfort in the ease, mobility and care-free living of rental.

As with any business when there is a large need, savvy entrepreneurs step in to fill that need. Indeed, the demand for rental housing has a substantial growth upside for the foreseeable future, which lends many opportunities for the real estate investor.

With such a long-term need, why is latter 2015 so important?

• Interest rates are still historically low. All savvy investors are watching the interest rates. It is no secret that the Fed is looking to raise rates in the latter half of 2015. While these rate hikes will not be huge, any increase at all cuts into the profits of you, the investor. I suggest investing now before rates climb.
• Prices are on the rise. No question that for investors buying over the last couple of years, it was a more optimum time to invest as prices were lower. Many markets throughout the country are still undervalued, which will provide for great returns while also providing accelerated equity build-up with the high demand for housing. I suggest investing now before prices rise.
• Household formation is on the rise. The growing population,as well as numerous Millennial children leaving the household, has created an unprecedented number of new households, which continues to put pressure on the housing inventory.

Investors, take note

While I believe the second half of 2015 is a great time to be investing, it may come with certain challenges.

So it may be a time where we separate the serious investors from the casual investors. Many great factors position the second half of 2015 to be great for investors.

However, with rising prices and reduced inventory comes a need for more purposeful, diligent and insightful investing. During the optimum buyers’ market, anyone can make sound investments with little effort.
As markets advance, the deals become harder to find and the result often stimulates a careless “auction fever” type of mentality. The mind thinks you need to hurry up and purchase before it is too late. This thinking can cloud your judgment, causing you to make careless buying decisions. If too many dollars are chasing one investment, you may be in an overheated market. The savvy investors know that when this happens, they should look for more sustainable markets.

A quick test to confirm you are investing in a safe or expanding market

• Undervalued market: Three times the median income in a market should qualify to buy a median-priced home. This suggests a balanced market. This means buyers can purchase a median-priced home for about 30 percent of their income. When you find markets like Atlanta or Philadelphia where you can own a home for around 20 percent, you have a strong growth market to invest in. On the opposite end are California markets,where it requires as much as 70 percent. As you invest in markets that are affordable, you have increased your sustainability exponentially.
• Growing populations will keep home prices rising.
• Job growth will keep housing in tight supply, which will keep home prices rising.
• Job diversity will sustain a market in the event of the collapse of one industry, such as we saw in Detroit with the auto industry.

The more market attributes you can get in your favor, the more you will increase your investment sustainability and increase your cash flow along with equity buildup.

The second half of 2015 is positioned to favor the savvy investor. The rental industry is in high demand.
There is always a great place at any point in time to make money in real estate.

The past five years have been stellar. Times are still great in the second half of 2015, but the window of opportunity will favor more selective markets.

About the author:

Larry Arth is the founder and CEO of Equity Builders Group, a Florida based real estate investment group. As a 36-year veteran to real estate investing, Larry understands that times have changed with the global economy and investment strategies must change as well. Larry is an international consultant and speaker and assists hundreds of investors each year, both foreign and domestic, to realize their investment potential. He analyzes locations for economic strength and for the largest and most sustainable returns and most importantly sustainable turnkey investment. His focus is offering turnkey investments to the passive investor.

Visit Larry’s website here.

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