The old adage ‘Buy Low and Sell High’ has never been truer. Real estate prices around the country haven fallen to 2002 levels and below, and with interest rates at historic lows, there’s never been a better time to invest in real estate. Tomorrow’s fortunes will be made today. For many long time investors, they see the opportunities of the 1990’s all over again, and this time they aren’t going to make the mistake of sitting on the sidelines while others grow rich.
As with any investment, your goal is always to buy at the best possible price you can. That makes today’s market a great one for investors. After all, prices in many areas are down as much as 35-50% from their highs in 2006, and they’re projected to stabilize sometime in the next 6-12 months. That means you should begin your search now for your next investment.
In addition to the huge drop in prices is historically cheap debt. The Fed Funding rate is essentially 0%, and interest rates haven’t been this low in over 50 years. What this means is that you’ll be locking in incredibly cheap debt for up to 30 years on any investments you make. And every year the purchasing power of the dollar erodes due to inflation, you’ll be making an even small ‘real dollar’ value mortgage payment. In fact, a recent study showed that if you purchased a home in 1972 using a 30-year fixed, your actual cost of borrowing after accounting for inflation was -1%. And this didn’t even take into account the tax benefits of owning real estate.
I know it seems difficult to consider making an investment in trying times like these. After all, everyday you turn the TV on you hear more bad economic news. Just remember, real fortunes are made when no one else is buying. Now is the time to start building the foundation of your future wealth and real estate portfolio. If you could turn the hands of time back, would you have acted differently during the 1990’s? I can’t tell you how many of my clients made a fortune by buying properties during the 1990’s, and watching rents and property values skyrocket.
Talk to your local real estate agent and find out what’s available. Meet with your mortgage broker and get prequalified. Be prepared to act when the right deal comes along. As I’m fond of saying, ‘Luck favors the prepared!’
Jon Swire is an author, teacher, investor and practicing commercial real estate agent, as well as the creator of the program, “There’s No Free Lunch in Real Estate”. He is one of the nation’s leading specialists in multi-family investments and has helped investors and students buy and sell over $250MM worth of real estate throughout Los Angeles and the United States. He’s worked on all types of property ranging from Single Family Residences to 2-4 unit properties, as well as multi-family and commercial, ranging in value from $200,000 up to $100MM. A testament to his program and success, Jon was one of the Top 25 Commercial Agents Worldwide for the past 5 years, and was the #3 Agent in the United States in 2006.
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