Where to park your cash in this uncertain market?
by Chloe Sowers February 26, 2009
After the real estate bubble collapsed and took the stock market and several dozen banks with it, investors may wonder where to put their money? Is gold an option? Are commodities worthwhile? Are treasury bonds attractive?
Gold is certainly an option, however gold does not provide current income. Gold is expected to rise in these inflationary times. It has real value. The only problem is, without holding physical gold, how do you know your funds are backed by the real metal? Scandal after scandal has shown fraud and oversight lapses. The gold fund you purchase may accept more cash deposits than it has capacity to appropriate real gold. If you own real coins or bars, you must also protect it, lest you find yourself relieved of it unwittingly!
During this recession, and possible depression, oil, metals, and other commodities may be worthwhile. However, with fewer factories in operation and less people shopping or travelling, there will be less demand for commodities. Hence the precipitous drop in oil prices in the latter part of 2008.
Treasury bonds may be attractive. However, T-bills have traded with negative interest rates as too many investors flee to government debt. With the inflation of the dollar, treasury bonds are certain to lose money over time. As the deficit balloons even larger, even the US government may go bankrupt eventually.
Then where is the best place to invest your money at? Believe it or not, in real estate! After housing prices have plumitted, now is the best time to purchase real fundamental deals with current passive income. Provided the rents and local market justify the sales price, one can find an excellent cash cow in real estate. With credit markets tightening, less and less retail customers can purchase homes without an excellent credit score. This leave less competition for investors. Instead, would-be homebuyers are forced to rent, driving up the rental market. Even in a recession, people have to live somewhere. A family is more likely to default on their credit cards than their rent, so rent is a safe income stream. Plus, real estate is a real, hard, asset. It cannot be stolen, and has tremendous tax advantages.
The trick to investing in real estate is to understand the fundamentals. This is what was lacking in the bubble, and really in all bubbles. A real estate purchase is only as good as the income stream it generates, similar to a bond. This income stream, as a percentage of purchase price, can be considered like a yield. It is in fact called the CAP rate, or capitalization rate. If you purchase a $100,000 house, and it rents for $833/month, then that yields $10,000 per year, which is a 10% CAP rate. That means, if you were to purchase the house in cash, you would get 10% return on your investment, or ROI. This is a simplified example which does not factor in taxes, repairs, etc. Of course, you will most likely use a mortgage, as leverage, and amplify your returns even more!
What if there was a way to find these deals quickly and easily, respecting your valuable time? There is! With RealtyRally.com, a slew of income producing wholesale properties are available across the country. Properties are listed by their CAP rate, so you can quickly judge the best deals available. Supporting documentation raises the confidence level, or star rating, and brings those properties to the top of the list as a 'sure thing'. You may also chose to invest in rehab properties, requiring repairs, and allowing you to increase the equity in your deal.
If you are a wholesaler, and specialize in finding distress sales, you can quickly and easily list your deals on RealtyRally.com to find an investment buyer in a snap. Your property is guaranteed to sell in 30 days or less.