Buying Real Estate Property- How Low Will it Go in Tampa?
We spend the majority of the day debating this question: How much cheaper will Tampa property get? Selling 20 houses a month gives us a good perspective on the local Tampa market. In my 11 years in the real estate market, I haven’t seen prices this low. Another factor to look at is the fact that you can now buy a house cheaper than you could build it!
Throughout 2009 we saw the demand for Property slowly and steadily rising. It didn’t affect the prices much, but consumer confidence seems to be increasing and more and more people are turning from the stock market and buying rental properties as a safer alternative.
It was probably late 2006 or 2007 since we had people rushing to buy a house, or even offering more than our asking price because there were several people wanting to buy the same house, but it also happened in 2009! We have seen a lot of people who were new to real estate buy their first rental in 2009. A lot of these buyers have the same opinion when they see one of our Project Analysis: “That’s too good to be true!” And they are right! A three-bedroom, concrete block house for only $29K?!? It is too good to be true, but the good news is – that’s where our market sits right now! These houses are located in neighborhoods that have a lot of absentee owners (people that own the house and rent it out), and are in neighborhoods that had the worst inflated appraisal numbers over the past 6 years. That same house would have sold for $89K+ in 2005, so people are skeptical about seeing that same house at $29K! My answer to that question comes from a great quote by Warren Buffet: “Get fearful when everyone else is greedy, and get greedy when everyone else is fearful”. The people who are buying these $29K houses from us are setting themselves up for a great cash flow position.
Let’s put this into perspective. Say the house rents out for $800/mo (back in 2005 it would have rented for $950+). Excluding taxes and insurance, the buyer will recoup his or her initial buy in a little over 3 years! Speaking of taxes, it is important to know that property appraisers base your tax bill on the previous year’s sales. They may be turned off by real estate taxes that seem unreasonably high. Understand that as the property assessors run out of inflated sales prices to use, they have no choice but to lower your taxes! We saw some great drops in real estate tax bills in 2009 and expect the same trend in 2010.
I believe that people buying rental properties for under $60K are setting themselves up for success over the next 5+ years. Either they’re going find themselves in a great cash flow situation or they will be selling the houses for much higher prices (more similar to the cost of construction). This is the best time to buy Tampa properties. Prices are at an all time low and the return is only going to put money in your bank.