Real Estate Predictions: What’s Up For The Next 5 Years for Investors?

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The next guy I meet who can predict the upcoming five years, economically, market wise, or anything else wise, will be the first. Everybody says they predicted this ‘n that, but can’t produce empirically documentable evidence of their brilliance. I’ve been right and I’ve been wrong. Honestly though? The times I’ve been right were when my predictions were timed after a trend had begun, or as it was starting. True enough, when you’ve seen the movie a few times, predicting the ending shouldn’t result in widespread kudos.

I made a bet with my main lender a couple months ago. Bet 30 year fixed rates for investors with 20%+ down wouldn’t hit 6% by Memorial Day. Did I bet $50,000? Hardly — a nice meal is on the line. Forecasting the future, especially when it comes to economic matters, is fraught with more potholes than a New York street in a recession. How many times have we all sat across from somebody who claims to have predicted this or that economic trend/cycle/event, but with no proof? The online world is silly with folks who not only swear they predicted all that’s happened the last several years, but how relatively easy it was.

If their words could be made tangible, turned into small pellets and spread on your lawn? You’d have the greenest lawn for miles around in no time.

The next 5 years?

Unlike most of the cycles many of us have lived through from the 1960s – 2000 or so, this one has, using weather as a metaphor, brought snow to San Diego, tornadoes to New York, and sandstorms to Green Bay. The last decade hasn’t simply been a different, albeit adventurous chapter in the book we’ve been living since the 1950s. This period has been a different book entirely.

Combine Middle East ‘unrest’, Oil problems, near double digit unemployment, the ripples, some known, others not yet known, from Japan’s recent problems, and predicting even the next five days seems folly. This hasn’t taken into account the mess in Europe, our own political turmoil, or an economic recovery that seems to exist only on Wall Street and the geniuses in D.C.

As real estate investors, read these various forecasts, (read: speculations) for what they are  at best — educated guesses. Then realize that, just like you and me, what influenced their prediction changed abruptly and without warning two days later.

Whether you’re a wholesaler, flipper, or long term investor, your strategy(s) are now more crucially important to your success than at any time in my memory. Relying on current factors remaining in place for any period of time is not prudent. Locking in a low, long term interest rate is. Creating your own capital growth, ‘appreciation’ if you will, is. Using prudent leverage while subsequently devouring debt like a monkey on a cupcake, is. And so forth, and so on.

The only prediction you can rely on with confidence is your own behavior.

Until all the above mentioned outside forces reduce themselves, one way or another to a low roar, what you do — or, sometimes even more crucially — what you don’t do — has the potential to have enormous impact, positive or negative, on your life for years to come. For some it’ll literally make the difference between retiring or not. Inaction will often be the main culprit in a train wrecked retirement. It’s not always what we do that derails us, it’s what we don’t/won’t do.

Bet on yourself

Bettin’ on any factor or combination of factors outside of what you can make happen, is a recipe for heartache if ever there was one. Don’t throw caution to the wind, but don’t allow yourself to be frozen with fear of the unknown either.

You already know the most important factor — what you can control — and what you can’t.

Sure, we’re now, in my judgment, in the middle of a very rewarding ‘perfect storm’ for real estate investors. Prices, rents, the cost of money, and tenant demand, all in storm mode — favoring investors with the intent and ability to follow through. But don’t add to your own weather patterns an ill advised reliance on others’ forecasts in this economic atmosphere.

Be your own weather pattern.

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About Author

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.

6 Comments

  1. Jeff,

    Another classic.

    While I have found myself in the prediction business from time-to-time… more wrong then right… the key is that I am paying attention and I have confidence in my abilties to be agile enough to shift approaches when needed.

    I hope every investor can find that right balance, staying informed, remaining confident, trusting their gut… and prospering.

    Pete

    • You said it, Peter. The flexibility to adjust, and sometimes on the run is, and must remain one of the many skill sets of the investor. Forecasting? Fun at BBQs and dinner parties. Your mention of balance might go relatively unnoticed many. It’s an irreplaceable factor in the long run.

  2. For me, real estate investor will be having their long decision, having also lots of wrong before having the right one. Investor should analyze and understand well what to decide before proceeding to processing.

  3. Jeff,

    That’s my way of thinking. Because things are uncertain and always in a state of flux, I try not to make absolute statements, but rather educate myself and make the best decisions based on what I know– educated guesses.

    I agree that borrowing money for 30 years at a low fixed interest rate would probably be a good decision for a lot of people.

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