- The Washington Times - Wednesday, July 19, 2006

Everyone’s looking for the next real estate rush, the place where people will be able to buy at $100,000 and sell for $200,000 in six months. So I get e-mails about whether one town is a better place to buy over another. Is it time to buy or sell waterfront property? Is land the next boom market for real estate?

The answer to all the above, simply, is yes.

Yes — if all the parameters that support a growing economy are in place and about to move forward. Yes — if the investment meets your goals on your budget at this time. Yes — if you have the proper financing in place to create a positive cash flow or find a property that is moving up in value at a clip higher than inflation.

Real estate, unlike stocks or bonds, is a good investment any time — you just have to know where to buy. The old adage, “location, location, location” bears repeating. Location is key and depends on the economic picture of that location at the time.

Wouldn’t you have loved to have bought a house in the Washington market, for instance, seven years ago? Any property would have done you proud. The whole market grew at 153 percent in that period of time.

Location and timing were key, all based on the advent of the latest economic boom, coupled with an affordable, but low supply of adequate housing.

So where can you find that formula now? Start looking at smaller markets where federal spending or private investing is moving upward.

For the start-up investor, look around your state first. Then use the following points as a guide to whether it is a good time to buy.

• Low housing prices. Where do the prices stand as compared to the potential for rental income? If a rental unit can be purchased so that the monthly rent covers the mortgage and tax payments, then this makes for a good start on the investment road. Many would-be investors look at the asset growth of an investment when they should really be looking at the net rental income instead.

If you can make 8 to 12 percent annual return on the value of a home in rental income, that is a good investment indeed.

To find housing prices, start with a Web search such as, “Springfield Virginia housing prices,” or whatever community you’re researching.

• Stable economy. What’s happening on the state and local basis? Again, begin your search by finding the state or local economic development authority. You’ll be looking for economic growth as compared to the U.S. economy and how it’s headed as compared to the past few years.

Look for economic forecasts, charts, employment and unemployment data, etc. Pore over these with a fine-toothed comb to find out if values in the community where you want to invest are moving upward or down.

• Planned jobs, plants, federal spending. In searches for the current economic picture, look for what’s happening as far as growth. Are new corporations moving in? Are current companies expanding? Are there job cuts or job growth? If you see indications that growth is on the way, get your checkbook out and start looking for an investor mortgage.

But make sure you check one more thing:

• Rental vacancy rate. OK, the housing prices are within your budget and the economy is stable. The area is about to grow. Great. How’s the rental inventory? Is there a lot of it? Is there too much?

The vacancy rate lets you know how long your property will be on the market and how much rental income you’ll be able to pull in each month. Will you have a positive or negative cash flow each month?

Once you have these points in your plan covered, you’re ready to start looking at property. Get together your real estate team — agent, lender, insurance agent, contractor — and hit the road to building wealth.

M. Anthony Carr has covered real estate since 1989. He is the author of “Real Estate Investing Made Simple.” Post questions or comments at his Web log (https://commonsenserealestate.blogspot.com).

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