The below graph from Zillow.com demonstrates the home value index and historical trends in pricing year after year dating from 2001 to 2013.
Nationally, the home prices have appreciated as an average annual rate somewhere between 3 and 5 percent all dependent upon the market and of course the index used for calculation. History has shown that properties have just about doubled every 20 years dating back to the 1800’s. But even with an appreciation rate of 3 percent it adds up and you can still build wealth, plus cover your mortgage payment by having renters in the property paying it.
Census records for 1940 to 2000 and national real estate sales data through 2010 showed that the median values of homes within the United States more than quadrupled over the past 70 years (this even includes the housing crisis in 2007).
Normal appreciation rates for real estate and rents vary from area to area but the above statistics prove that investments in real estate pay off. Although history is higher on appreciation rates, I always factor more conservatively at 2% for both buildings and rents.
You have a unique opportunity to build a large investing portfolio and with the right bank relationships and correct implementation have very little if any of your own cash into the deal.
Steady Demand for Rentals
Demand for rentals is not very likely to ease in the near future making a real estate investment in rental properties a good one. People will always need a place to live so you can’t go wrong with a rental. A large number of people have not seen raises or costs of living increases because of the economy. Meaning that their wages haven’t been able to keep up with the rate of inflation which makes it even more difficult for a wannabe homeowner to put money aside towards saving up for a down payment on a house. Not to mention more and more American’s carrying larger amounts of debt today due to student loans, credit cards and auto loans. Depending upon the neighborhood and type/price of the property for rent you will see everyone from college kids, newlyweds, Section 8, divorcee’s, renters with financial problems who cannot get a loan to people wanting to downsize which includes empty nesters.
“I always felt very secure and very safe with real estate. Real estate always appreciates.” –Ivana Trump