Investing Tips For Buying That Mansion In The Suburbs Now

Houses in the suburbs are less costly than homes in a thriving downtown.

If you plan to live in it, a house is usually a safe place to park your money, but not to see it grow. On the other hand, in many suburbs you can currently prepay that rent at a discount–meaning a house might be a decent investment now.

Buy like a landlord. In most markets, housing appreciation is likely to be modest, and you may not be able to sell at a profit if you hold for less than ten years. So buy a house with leasing appeal. Both renters and buyers will pay a premium for close-in.

Check your price-rent ratio. It’s like the price-earnings ratio on a stock. Favor houses that sell for 10 to 20 times projected annual rent.

Look at inventory. That’s the number of months it would take, given the current rate of sales, for the current supply of homes to disappear. If it’s consistently been four months or les s, the market is hot–it’s probably better to buy now than wait. If it’s seven months or more, the market is cool and prices are likely to stagnate or fall. Be picky and bide your time.

Know when to buy new. A new house commands a premium. Investment-wise, it’s sometimes justified.

Consider realty stocks instead. If you want a play on the suburbs, but can’t bear to leave the city, consider a REIT that focuses on owning apartments in higher-end suburbs or buy shares in one of the home builders; while no longer a screaming bargain, some could still do well if housing analyst Ivy Zelman is right about the long–term bull market in housing starts.