Today we’re going to talk about the benefits of buying now.
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker
Marcia Edwards: Let’s talk to you buyers out there, or would-be buyers, or could-be buyers. It seems discouraging because the inventory is low, but there are some benefits to buying now that will still keep you ahead of those who buy six months from now.
Bob Nelson: Well, let’s take a look at the appreciation factor, the fact that the housing market is proving itself to be a very interesting growth opportunity, in that if I acquire a property and it becomes more valuable in the near future, that goes directly to my equity possession. Equity is defined as the value or whatever you’re able to sell a property for minus the debt that you have against it. That’s equity. So if I bought with, say, 10% down and it goes up 5% in value, my equity has a 50% increase. It’s gone from a 10% to a 50% position, a 50% increase in position.
Marcia Edwards: That’s the return on your cash, and that’s a great way to look at it. What we’re looking at right now also is we’re looking at 7% appreciation for the end of 2019 in the direction we’re headed. Could be more depending on what price point you’re looking at and what opportunity you have for a sale, but really, you’re looking at pretty good appreciation rates.
Bob Nelson: That is so important. Now, anticipate holding the property for three or four years before you do something. By doing something, maybe refinancing it, pulling equity out to buy the next property, now you own two purchased off of the benefits of the first one, or that you sold and acquired the next one, that if you were to own something for three or four years and it had gone up 7% in value, you’re talking about a monster increase in your equity position, and the equity position is what counts.
Marcia Edwards: In addition to that, you’ve got financing that’s available with better terms than we’ve seen, and we probably will not see again for … not ever … I can’t say forever, but for a long time. So what we’ve got is cost of money is lower, so that even increases the value of the money that you borrowed because you’re getting a higher return than what you spending in regards to interest.
Bob Nelson: Exactly. If I were to borrow at 3% and invest in something that’s going up at 6%, I’m making a huge increase off of money that isn’t even mine. Because I placed it in an asset that’s going up in value, I get to have the benefit of that appreciation. The lender’s only charging three and everything’s going up at six, I’ve got a whopper of a return right off the bat.
Marcia Edwards: And that creates some urgency to take a look now if you’re going to be a buyer in the next couple of years.
Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30pm on KPNW for the “Real Estate Today” radio show.