What a week.  For those of you who were keeping track, the DOW plunged 698.63 points, or 5.75%.  The Nasdaq Composite fared even worse as it plummeted 8.13%.  If you are someone who is actively investing in real estate or are considering purchasing your first investment property, weeks like this make it painfully obvious that diversification through investments backed by tangible assets are a smart move.  While completely exiting traditional asset class investments such as stocks, bonds, and treasuries might be a bit of an extreme strategy - diversification through local investments that do not correlate with Wall Street allow smart investors to insulate their portfolios from sudden market downturns.  

When coupled with an effective long term strategy, real estate can provide investors with a "safe haven" to shield their portfolios during uncertain economic times.  Even in the most unpredictable market conditions, real estate has very little chance of losing 5% or 10% of its value in a single week.  In fact, most investors that we work with are seeing some of the highest rental rates that they have seen in years.  The investors who are experiencing the most success in managing their rental properties are securing long term leases (2-5 years) with well qualified tenants who are thoroughly screened before a lease is signed.  

While there are hundreds of factors to consider when determining what causes a property to sell for the price is does, you must always consider the target market that will be purchasing the property.  The two most defined groups are first time home buyers who are currently renting, and existing homeowners who are looking to either upsize or downgrade. 

Of these two demographics, first time home buyers are effected by conditions on Wall Street much less than existing homeowners.   Most first time home buyers are between the ages of 25-30 and typically do not have significant retirement funds built up at this stage of their lives.   

On the other side of the coin, existing homeowners are typically over 35 and often have over 10 years of retirement savings built up - most of it invested in traditional asset classes.  If those funds are readily convertible to cash, they would likely tap into those funds as all or part of a down payment on their next home.  Weeks like this can significantly change a buyer's ability to finance their next home purchase.  That is why local investors prefer to purchase properties that will be resold to first time home buyers who are less effected by unpredictable shifts in the market.  

Next Thursday, August 11th, Build is hosting a free real estate workshop from 6:30-7:30.  This month's topic is entitled "What is Selling Right Now?" and is designed to help active real estate investors stay abreast of current submarket conditions.  It is also an excellent opportunity for individuals to get the right information before making an educated decision about whether real estate investing is right for them.  All of our workshops are free and open to the public - and no, we won't be selling anything at the end.  You may download a printable flyer with further details here. 

"What is Selling Right Now?"

Thursday, August 11, 2011

6:30-7:30 pm

Crowne Plaza Hotel - Blue Ash

5901 Pfeiffer Road

Cincinnati, Ohio, 45242