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Talking Appreciation

Anyone who knows anything about Real Estate will probably tell you that it “tends to appreciate.” Over the long haul, there is no better investment and none of the other forms of investment like stocks and bonds has ever performed (over the long haul) as well as Real Estate. At this point, there are surely a few readers out there that will tell you they beg to differ and they will want to share their respective tales of woe on how they actually lost money.  Of course, there are exceptions to the rule, and if someone sells too quickly or finds themselves compelled to sell in a decidedly buyer’s market, they could take a hit, but if you look at the graphs over the last 100 years, the numbers continue to go up and up and up. Granted there are a few dips along the way but the trend is unmistakingly on the incline. One of the things I hear consumers say frequently, is something like,

     “Well, how the hell high can prices go?” 

      Or “the bubble has to burst, sometime soon.”

I am going to share something with you that will really freak you out. Ultimately there is no ceiling to appreciation, It will frequently reach a point where it seems unbelievable. Also, whenever bubbles have burst in the past in any particular markets, they have always recovered a few years later.  The word always is as close to having no exceptions as is imaginable and the results can sound pretty crazy. Let me tell you a story from first hand experience. 

I bought my first property back in 1980 in a rundown neighborhood in downtown Brooklyn NY. I paid $65,000, and everyone told me it was ridiculous. I was told I overpaid, it was a tough neighborhood, etc. If “location, location, location” was the golden rule for Real Estate, I was really in trouble because I was buying within 200 yards of a public housing project. That horrible looking building was never going anywhere and it would always negatively affect the value of my property.  This was true. Houses a few blocks further away did appreciate faster.  There was no denying that. Oh, did  I mention that I had to put at least another $30,000. to make the house hapitable. I watched the various mayors of that city come and go. I saw improvements being made in the neighborhood while crime remained pretty much a constant.  When I sold it 5 years later I made a significant profit. But hopefully you are sitting down when you read what I am going to tell you now. 2 years ago, it sold for 3.2 million dollars. It is virtually the same house and the housing project is still there. By anyone’s reckoning, If you told them back in 1980 that it would one day sell for over one million dollars, they would have looked at you like you were smoking the same crack cocaine that they were selling on the corner of my street back then.  The 3.2 million dollar price tag was insane. Further insanity is that today it would sell for more. The people that bought it at 3.2 million probably thought at the time that they were being skinned alive. When they sell it for a significantly higher price down the road, they will simply just  expect it.  So all pricing is relevant. 

Look in your own neighborhood and consider any house in that neighborhood and what you might have been able to buy it for 10 years ago. How about 20 years ago? Some will tell you how much they kick themselves because they didn’t buy back then, when they should have. There is little to no clairvoyance required in Real Estate to make money and take advantage of the natural appreciation that occurs with little to no effort.

Let me give you the ultimate rule of thumb on this.  When you are thinking Real Estate, think about it as if it were a tree. There are two times to plant a tree: today, and 20 years ago.  Something else to consider on this, if you look at pricing around the country you will see some crazy prices out there. If you are looking anywhere in WNY or the great 716, you have to be amazed at what bargain priced Real Estate we have here, compared to NYC, or Chicago, or Los Angeles, or just about ANYWHERE else.  There are still a lot of really smart buyers out there, who are continuing to step up and buy today, (even with higher interest rates than last year.)  Suffice it to say that if you are not buying for whatever reason, those that do, will not be disappointed when they see what their purchases are worth 5 or 10 years from now.

Hey, I wrote the book on Real Estate, literally.”

Author Brendan J. Cunningham is a New York Licensed Associate Real Estate Broker, lead of the Platinum Team at HusVar Real Estate, as well as an accomplished writer, Shakespearean trained professional actor, and podcaster.

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