Should You Invest in Real Estate Today?

Given that today’s market leans heavily toward sellers, should you invest in real estate? The answer is yes, but not without following these tips.

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Our current market is booming with activity and inventory sits at an all-time low, which is leading many of my clients to wonder if there are still opportunities to invest in real estate despite the definite seller’s market we’re in. 

Admittedly, as someone who’s almost always investing in real estate, I can tell you that opportunities are harder to come by when the market favors sellers so strongly. Still, that doesn’t mean there are none whatsoever. With the right guidance and drive, you can find a property worth investing in, and today I’ll offer some tips for doing so. 

Your priority when venturing into the market should be to look for a property that you know will break even. You can’t break even on a property if you’re having to bring money to the table each month.

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There’s no limit to the number of properties you can invest in, as long as they have a positive cash flow or are breaking even at the very least.

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As a general rule, most people invest in real estate for one of two reasons: to generate cash flow or for appreciation. It’s not often that you’ll find a property that both appreciates and generates considerable cash flow. 

As many of you know, my wife and I own property in Maryland, Virginia, and D.C. The properties we own in Baltimore have yielded double-digit cash flow, but over the last 10 to 12 years, they haven’t appreciated at all. Conversely, my properties in Virginia have hardly produced any cash flow, but their appreciation is soaring—6% to 8% annually.

Another tip when you’re out looking for an investment property is to try and stay under $400,000. Investing in a $1.3 million home in Arlington might sound like a good idea until you realize that the rent you charge will eventually cap out somewhere around $4,000 to $4,500, which won’t be enough to cover your mortgage, taxes, and the costs associated with finding a new tenant. I strongly caution against purchasing above the $400,000 price point if you don’t want your investment to become a financial liability.