Is it the time to invest in a rental property? Before answering the question, you need to ask yourself two questions.
1. Will the rental property have a positive cash flow or breakeven?
2. Does your new rental property in an area have an appreciation potential?
If you have YES for both questions, it is a buy! But actually, the answer is not that simple. You need to look at your area of population growth, job market, school, etc. I would consider the first buying question more than the second one. As long as the property is situated in a stable real estate area, the positive cash flow is more important than the increasing price of property prices since you are buying a property for investment, not flipping. I will not worry about the price based on what so called expert saying.
Before COVID-19, it was a buyer’s market. The reason being is for the past 10 years, we had enjoyed the low mortgage rates fueled by Federal Reserve Bank interest rate policy. As the economy recovers from the 2008 financial crisis, under the Trump administration’s pro-business policy, we had seen our GDP growing at around 3% annually. With a strong economy, Federal Reserve Bank had been raising the interest rate for the past two years before 2020, which translated to higher mortgage rates. That was why we were seeing housing transactions coming down in some areas in the US due to higher mortgage rates.
When COVID-19 struck at the beginning of 2020, US Federal Reserve Bank immediately lowered the interest rate to help stabalizing the economy and congress passed CARES act to help millions Americans affected by the lock downs. All these monetary and fiscal policies have brought down the mortgage rates to historical new low with 30yr fixed below 3%. The low mortgage rates and stilumus money fuel home buying and refinancing activities and quickly the real estate market becomes a sellers market with multiple offers and price bidding up. One more factor of sellers market is that people are seeking bigger space to work from home by moving from cities to suburbs because of the lock downs.
