Last week an investor called me from LA who is a stock broker. Our conversation got me thinking about the rich investment opportunity real estate provides, in spite of all the talk of a bubble burst. I’ve played the stock market for years and have won some and lost some but I’ve never been able to get it down to a predictable outcome. I invest in stocks because I’m told by financial advisors that I need to diversify. However, there is a way to invest that has many more controllable and dependable outcomes – Real Estate! Real Estate will never go out of business, never merge, never have problems with DOJ, never be outdone by the overseas manufacturing industry, never worry about ever changing technologies. There’s always supply and there’s always demand. With the exception of mother nature simply obliterating the landscape, real estate will always be there.
I don’t mean to paint an overly rosy picture here, but having been in the business for, gulp, nearly 30 years, and watching the ups and downs and downs and ups, (I once sold a home to a client with financing at 22%! not to mention using precious gems as a down payment!), I just don’t see the glass as half empty but rather half full. I have been a restaurant and marina owner and a real estate developer and investor, throughout the various market ups and downs. I suggest you look at real estate values over those last 30 years and see how many times they’ve multiplied. And we’ve had 5 or 6 ‘busts’ in that time. As a new licensee, I sold my first home for $32,500 in 1978 and today that home is listed at $495,000 – a multiple of 15 times. We all know this is true, so why are we all sitting around worrying? All this talk about real estate busting like the stock market did is just ridiculous. We’re not comparing apples with apples and even if the prices do go down, it will most likely be short term creating a great buying opportunity, and when prices bounce back we’ll all sit back and have a good laugh at all those naysayers with dour predictions.
I wish I’d taken my own advice in 1986 when I could have purchased 150 homes from a bank for 20 cents on the dollar. I didn’t have the foresight at that time to know what I am telling you now; real estate bounces back and prices rise even higher. Had I bought those homes that year, I’d be writing this from my estate in Maui! I’ve learned my lesson and now I want to share my perspective with you.
So, keep on investing. You may not be able to live off the profits from a short term flip but if you invest with someone that understands the market and the profit potential, you won’t have to worry about any ‘busts’ now or in the future.