Is the Time Right to Invest in Real Estate? Chicken Little vs. PollyAnna

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If you’re considering real estate as an investment, there’s one thing you’re guaranteed to hear:

Now is not a good time.

Your brother-in-law, your best friend, and your Great Aunt Minnie (who keeps her riches in a cigar box under the doghouse) will all surely recite text and verse. The time for real estate is over. No one can make any money in this market. If you’d just invested back in ’93, then maybe…

Let’s start with an over-generalized, highly categorical statement that will surely cause twitching amongst the congregation:

  • There are no bad times for real estate investment. And furthermore:
  • Today is always a very good time to get started.

Let’s Discuss

Real estate is a diverse investment with multiple areas of interest. Saying you want to invest in real estate is similar to announcing you want to fly. O-kay… fly how? Are we talking single engine aircraft? Jet fighters? Helicopters? Or were you hoping to sprout wings?

In the world of REI, you’ve got rehabbing, buy-and-hold, speculation, raw land development, flipping, as well as numerous subcategories within each. There are up and down cycles for each type of real estate investment but at any given moment, at any location, there will be potentially profitable and decidedly poor ways to invest depending on current market conditions (which have this nasty way of changing when you’re not paying attention. )

For example, a rapidly appreciating market makes it difficult for buy-and-hold landlords to find homes with positive cashflow while flippers are out having a blast. When list prices drop like bowling balls from an airplane, buy-and-hold investors rejoice and make merry whilest flippers make like chicken little (and rightly so.)

The Magic Key

There is no substitute for learning your market. You can’t rely on CNN and the nightly news for your intel. (Besides, those guys seem to think everyone lives in NYC or Boston.) All the stories about house prices dropping…how about we define, exactly where? Not in my area. Not in tons of other places either. But if, thanks to cable news, you think the median house price is $245,000 and show up in my neighborhood, excited to find new homes selling for $150,000, you’re liable to overpay by 20-30K and wind up with the albatross of negative cashflow draped indelicately around your financial statement.

And just for the record, ‘tis a very bad idea indeed to decide which area of REI to specialize in before learning your local market. A biggie problem we see in here are newbie investors, fresh out of some seminar with A Method. Six months later, they’re whining that ‘it doesn’t work here.’ Well, Duh! If they’d taken the time to learn the local market first, they never would’ve gone to that seminar in the first place and could’ve saved a ton of both cash and time, not to mention aggravation.

And in Closing…

As investors, we must adapt with the market. Markets change, the economy heats and cools, Wall Street bears or bulls. As big-shot investors, committed to growing a healthy portfolio padded with the increase available through real estate investment, we either Adapt or Die. It’s survival of the fittest, baby.

But one thing’s for certain:

  • Someone near you knows their local market.
  • Someone’s done their homework.
  • Someone’s prepared to take advantage of current market conditions.

At any given time, someone in your area is making money in real estate investment.

Now is a very good time to get started. Always.

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  1. If you can afford to buy a house you should always buy one, as you need a home anyway, it forces you to save money. However if your house value is the same or lover after 10 years it is not something that is out of the ordinary, you still did well. As for buying investment properties I do not think it is a good investment, there are better places to put your money in.

  2. Real Estate Expert, Ilyce Glink says the outlook for the housing market is not good, but offers great advice in her column “Crosby, Stills, Nash and Young Had It Right: Love the House You’re With”

  3. Gerald Romine on

    The key to investing is “cash flow.” If you are able to cash flow properties it is hard to go wrong provided you have principle reduction in your loan payments.

    Where so many people went wrong was in confusing “speculation” for investing. The buy for the sake of buying because everything is going up makes no sense to a numbers investor because when reality hits somebody will be holding the property that won’t cashflow.

    And that is what we are working through now.

    Gerald Romine

  4. I do not see how anyone could ever think real estate a bad investment. There is only so much space on this planet and with the population increasing the old rule of supply and demand makes it clear that property is a good buy. There are better times to buy than other times, but I cannot ever see it being a bad idea.

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