Tuesday
September 16, 2014

More Americans Bank on Real Estate to Build Wealth

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More Americans Bank on Real Estate to Build Wealth

Some Americans are embracing the investor role in real estate, hoping it will fund their future retirement. First-time investors are taking the strategy of buying foreclosed homes at super low rates and turning them into rental properties to increase cash-flow now and hopefully later too.

“The typical small-size mom-and-pop investor has two or three properties, looking at it as an income supplement with the possibility of being able to sell at some point when prices rise enough for them,” says Lawrence Yun, chief economist of the National Association of REALTORS®.

“I’d rather buy real estate than gamble on the stock market or get almost no return from putting my money in a bank,” Barton Wallace, a real estate investor who owns four rental properties in Hingham, Mass., told Reuters. “I don’t have any problem getting tenants.”

The rental market has been performing strongly: Average U.S. rents have soared to a record $1,086 a month during the third quarter, according to MPF Research. Meanwhile, the vacancy rate dropped to a 10-year low in the second quarter. 

To fund their purchase, these first-time investors are tapping retirement accounts and transferring their cash into self-directed Individual Retirement Accounts, which allow them to invest and then funnel the returns back into the accounts.

In August, investors snagged about 66,780 homes -- the highest level since the start of the foreclosure crisis, Bloomberg reported using National Association of REALTORS® data. 

Source: “Foreclosures Drawing Cash as 401K Returns Sag: Morgages,” Bloomberg (Nov. 4, 2012)

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