By Kim Olson
The real estate industry is in a slump especially when it comes to homeowners who are trying to sell their own homes, but beginning this year the investment sector of the housing market showed a major upturn with 19% of residential purchases being made by investors, according to the National Association of Realtors. One out of 3 residential properties bought were also paid for in cash, a new record.
Investors have been watching and waiting for the right time to invest again, and it looks like 2011 might just be the year. Investors are laying down their hard earned cash to become landlords in rising numbers.
One of the fastest growing areas of the investment market is residential real estate. Investors are snatching up single family homes and multifamily units on the cheap as foreclosures and short sales. Foreclosures are especially hot when they are in reasonably good shape, because they average 30% below market value. A good investment property purchase can be turned around quickly and put on the rental market.
Foreign investors are bringing more capital to the U.S. investment market than investors from the U.S. The 19th Annual Foreign Investment Survey, conducted by the Association of Foreign Investors in Real Estate (AFIRE) found 60% respondents said the United States is the top place to invest in real estate for the best possible returns.
Real Estate Investment Trusts (REIT) are becoming a hot commodity again as investors deploy their money without any direct involvement in managing the day to day operations of real estate. REITs have inflated in value an average of 128% over the past two years.
But Real Estate Investment Trusts aren’t cheap to invest in so investors are exceedingly careful to study REITs before they take the plunge. REITs typically invest in commercial real estate holdings in retail, office space, hotels and shopping malls.
Even during troubling economic times REITs maintain attractive yields because they have to return 90% of taxable income to the shareholders. REITs had an annual yield of over 4% at the end of February compared to Standard & Poor’s 500 stock index, which had a yield of 2.1%.