To Have and to Hold

No, this post isn’t about marriage but it is about a long term commitment to real estate investing. As you're probably aware, some of the world's richest people have made their fortunes by investing in real estate. You can go to any bookstore and find dozens of books on how to buy and flip a home. You can watch TV and see all of the infomercials touting no money down and cash back at closing strategies. One common thing you may have noticed in all of these books and programs is that they don’t tell you anything about what could go wrong.

In a bull market these strategies did make some investors money. Do we really have any idea how many of them made a significant profit. If you pay attention to the updates on some of the “flip” TV shows you discover that the profits were extremely low and they never seem to figure in the personal time the projects took. In one instance on an HGTV show for a local Northern Virginia home they touted the results of a fast sale with a big profit. I checked the MLS and tax record and found that the property didn’t even sell. Now what’s up with that?

When the market was on the fast spin cycle in Northern Virginia in 2004 I decided to have a go at a pre-construction flip. It was a nerve racking experience and even with my knowledge as a Realtor® I wasn’t sure if I would succeed. Fortunately for me my timing was right and I did manage to make some money. However, I did watch a number of other agents get caught in the local market shift and lose a considerable amount of money. The experience made me realize that it was not a strategy that I would recommend to anyone else and not an experience that I would repeat.

Is real estate a good investment decision in today’s market? As with any decision that you make about your financial future it is an individual decision based on your personal circumstances. There have been plenty of people in the past that have said they don’t think that real estate is a good investment.

"Houses cost too much for the mass market. Today's average price is around $8,000 - Out of reach for two thirds of all buyers. (Science Digest, April 1948)

"The medium price of a home today is approaching $50,000.... Housing experts predict that the future prices won't be that great. (Nations Business, June 1977)

"Financial planners agree that houses will continue to be a poor investment. (Kiplinger's Personal Finance Magazine, November 1993)

If you look at the people who have made money in real estate over the years, oh let’s just say DONALD TRUMP, it is the investors that purchased property, maintained the property, rented the property and then exchanged the property that are prosperous today.
So if you are considering investing in real estate today spend some time with other successful investors and read their books on real estate investment strategies.

Find a Realtor® who is familiar with investment strategies and the benefits of 1031 exchanges, talk with an accountant or financial advisor to understand the tax implications for your income level and have an attorney advise you on how to take title to your property to protect your personal financial assets. Once you have done your research and it is right for you, go for it!