New ways to think about real estate purchases

Have the guidelines for buying residential or commercial real property changed in the wake of the housing and foreclosure crisis? A recent article calls for greater caution.

For example, conventional wisdom held that a home is a safe investment option. At a minimum, real estate ownership was considered more financially beneficial in the long term than renting.  However, when the housing market crashed, many homeowners found their mortgage balance below the property’s fair market value. Although property values have been climbing upward in many neighborhoods in Massachusetts and across the country, equity in real estate is no longer regarded by some as a sure-fire investment.

Another way to evaluate a home purchase is considering what the traditional 20 percent down payment might have yielded if invested in securities, such as stocks or bonds. Unless an individual is planning to stay in a home for several years, he or she might want to avoid the closing and relocation costs.

Yet there is a flipside: the trend toward viewing renting as a more favorable option has encouraged more investors (and prospective landlords) to purchase homes. Others have invested in homes requiring substantial repairs, but priced at a deal too good to pass up.

Regardless of whether a purchase is for personal or business use, a consultation with a real estate attorney can be a wise idea. An attorney who has experience with real estate transactions of all kinds can review the documents for any hidden liabilities. To the extent a property will be rented out, an attorney can also help an owner draft a commercial lease that will better withstand challenges.

Source: CNN Money, “5 myths about buying a home,” Les Christie, Aug. 13, 2014