I’ve had several book signings lately (please check out The Essential Handbook for Buying a Home) and it always fascinates me that the first question most people ask is, “is this a good time to buy real estate?” Or, I hear, “oh, real estate. This isn’t the time to be buying real estate.”
I blame the media for this kind of ignorance. It’s not stupidity, simply mis-information. Actually, this is a FABULOUS time to buy real estate and, if you aren’t buying, you WILL be kicking yourself 10 years from now.
Real estate is cyclical. Values go down from time to time, but they always come back up. In fact, unlike stocks that can go all the way down to ZERO value (and companies simply cease to exist), real estate goes down but never to zero. Even in “blighted” areas that are filled with crime, the land itself always maintains value and will be worth more in the future.
Why? For one thing, no more real estate is being made. For another, the population continues to grow and, therefore, the need / demand for available real estate continues to increase.
But, that’s an even bigger picture. My point here is that real estate today, at this very moment, is a tremendous value. Prices are low and so are interest rates. Ten years from now, prices WILL be higher and, chances are, so will interest rates.
What does this mean to you, personally? Buy now, hold onto the real estate, and put in a tenant. The tenant should pay at least $200 per month more than what your expenses to own that piece of real estate are. A $200 per month cash flow is what we consider “break even.” That extra money every month will cover things like a new hot water heater, plumbing repair and, when the tenant moves out, carpet and paint for the next tenant.
Owning advantages to you are:
- rents will continue to increase over the next ten years, but your mortgage payment won’t, so your cash flow increases year after year
- the tenant pays down the mortgage for you
- the property appreciates over that time (increases in value) and..
- you have the added benefit of tremendous tax deductions for this piece of real estate while you own it.
Win, win, win, win, win.. win.
As beautifully as that process works once; imagine if you had two – or three. Win, win, win, win, win times three! Beautiful.
“But what if I put someone in and they mess it up?”
To begin, how many real jerks are in your life? A few – but only a small percentage of the people you know (I hope.. or we need to have an entirely different discussion). Same with tenants, only a small percentage of renters are a problem. And, even with “bad” tenants, the damage done is usually minor – paint, carpet, maybe a hole in the wall or damaged door. Costs to repair the damage is in the hundreds of dollars. The value of your asset is in the tens of thousands. You fix it, put in a new tenant and the “win, win, win” begins again. You still have the only thing that really matters – your asset – that piece of income producing real estate.
In today’s economy, with housing prices down like they are, we should all be buying up as many properties as we can get our hands on. (Buying right is the key here so contact me if you don’t know how..)
If you aren’t buying real estate now, ten yeas from now I’ll be screaming, “I TOLD YOU SO!”
Are you currently buying real estate? If not, what will it take to get you started?