Please don't buy real estate, that is, unless you are really sure what you and your market are doing.

Yes, yes, you have to take the plunge and do it at some point in order to learn.

Yes there are plenty of naysayers who tell you not to buy, and you need to ignore some amount of that message. But pessimism and pragmatism are different things. Here are a few points:

The Cycle

Real Estate prices, like those of other asset classes (Stocks Bonds Commodities) move in reaction to economic trends and conditions. Often, the best time to buy those assets is when no one else is doing so. That was the case for much of 2008-2012 in the United States. Things have changed in many markets (disclosure: in my markets in Northern California prices have changed a lot and are back above peak in some cases).

In my sampling of experts and podcast guests, it seems like there are a lot of guys (aren't they mostly guys?) who began investing in the past 5 years. Again, disclosure - I started investing in real estate in the past 5 years(!) Nearly everyone of those people has met with success. And while each person worked hard and took risk, a big part of the investment success of each individual has to do with the upswing of the overall market. Whether you were buying-and-holding or flipping, a rising market was lifting all boats.

If you took the same money invested and put it in an equity mutual fund, you would have also made very good money. Because the mutual fund managers were so smart? Not really. Because the whole market was going up.

Where is your local market?

We went through a balance sheet contraction recession where weak borrowers were (and continue to be) separated from their assets. Entities in control of those assets (banks, lenders) wanted to dispose of them at the same time that they were not really lending to people. An abundance of “forced sellers” drove prices lower while credit markets were frozen.

This background of selling meant that you could basically buy almost anything between 2008 and 2012 and you would be sitting on a nice profit today. But a lot of that forced-seller/few-buyer imbalance has been squeezed out of markets. Your market may be different and prices may still be at very depressed levels. That’s great for you as a potential investor. But please keep in mind that the successes experienced by many of the heralded recent ‘experts’ here have a lot to do with the timing of the market cycle.

It can still work

Absolutely pockets of value still exist. Interest rates are low by historical standards, and we have had a whole generation of people remain as renters (delay household formation) for much longer than similar age-group people have done in the past. There is some pent-up demand. But know your house (investment), your neighborhood (local market) and broader area. Are you getting a good deal in a rising market? Or are you being handed a so-so deal with a low cap rate, or a fixer for which you have had to bid against 40 other buyers?

I am working on ways to take chips off the table and to take less Real Estate risk. Let's be careful out there.