Fed Policy Should Drive Investors To Real Estate
About a week ago, the Fed announced that it would hold interest rates at or near zero percent through 2013. The feeling in Washington is that to raise interest rates now might hamper the already fragile economic recovery.
This recently declared policy means two important things for investors. First, you won't be able to make money merely by investing cash in various bank instruments ( like CD's, for example). Second, mortgage interest rates will likely remain low for at least the next two years.
Fed monetary policy has kept interest rates low for quite a long time now, and lender banks are not making much money from those kinds of loans. As a consequence they are not paying much for the money you deposit with them. CD's are not paying near what they were in my father's day, neither are passbook savings or other bank-backed programs that have been traditionally supported as "safe havens" for money -- especially among those approaching their retirement years. The other side of this coin is that it encourages low mortgage rates, thus making housing more affordable.
If you think about it a little, this Fed policy encourages investors to look toward real estate as a viable addition to their portfolios. After all, you won't be able to make money with money for at least another two years, and mortgage interest rates look especially attractive for the foreseeable future. On top of all that, real estate prices are low right now and many sellers seem willing to negotiate even better deals -- especially if the property is a short sale or foreclosure.
This kind of policy setting by the Fed should drive investors toward real estate. This might be the time to invest in some good residential real estate or small commercial property with an eye toward making a profit each month from rental income. Look to the long-term and forget about "flipping" the property which is a short-term strategy that works best when the market is overheated with buyers who have easy access to mortgage money.
Of course, you can always put your money into the stock market if you like roller coaster rides. If you do that, keep in mind that they call the last ten years of stock market activity the "lost decade" because practically nobody -- even professional money managers -- made any appreciable money in the stock market. The last two weeks should prove my point on that.
Since the Fed's window for raising rates is at least two years away, I'd say now is the time to consider adding real estate to your portfolio.
-30-
This recently declared policy means two important things for investors. First, you won't be able to make money merely by investing cash in various bank instruments ( like CD's, for example). Second, mortgage interest rates will likely remain low for at least the next two years.
Fed monetary policy has kept interest rates low for quite a long time now, and lender banks are not making much money from those kinds of loans. As a consequence they are not paying much for the money you deposit with them. CD's are not paying near what they were in my father's day, neither are passbook savings or other bank-backed programs that have been traditionally supported as "safe havens" for money -- especially among those approaching their retirement years. The other side of this coin is that it encourages low mortgage rates, thus making housing more affordable.
If you think about it a little, this Fed policy encourages investors to look toward real estate as a viable addition to their portfolios. After all, you won't be able to make money with money for at least another two years, and mortgage interest rates look especially attractive for the foreseeable future. On top of all that, real estate prices are low right now and many sellers seem willing to negotiate even better deals -- especially if the property is a short sale or foreclosure.
This kind of policy setting by the Fed should drive investors toward real estate. This might be the time to invest in some good residential real estate or small commercial property with an eye toward making a profit each month from rental income. Look to the long-term and forget about "flipping" the property which is a short-term strategy that works best when the market is overheated with buyers who have easy access to mortgage money.
Of course, you can always put your money into the stock market if you like roller coaster rides. If you do that, keep in mind that they call the last ten years of stock market activity the "lost decade" because practically nobody -- even professional money managers -- made any appreciable money in the stock market. The last two weeks should prove my point on that.
Since the Fed's window for raising rates is at least two years away, I'd say now is the time to consider adding real estate to your portfolio.
-30-
posted by Terry Ward at 4:04 AM
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