Wanna Buy Some Real Estate?

Ok, so I came into the office this morning and I thought to myself what should I write about in today’s blog? So I asked one of our friendly admins, in an effort to jump start my own brain,

 “When you think about Real Estate what’s the first thing that comes to your mind?”

She responded quickly and with great enthusiasm, 

“I want to buy more of it, but I am hoping and waiting for prices to go down, perhaps not to precovid prices but, well you know what I mean.”

Now she went on to explain that she had bought several houses before, fixed them up, flipped them and she did very well and she wanted to do it again, (and again.)  I thought, good for this “young” lady (these days just about everyone is younger than I am). How smart, and kudos to her for looking long term. It was clear that she had a conviction that eventually there had to be some sort of a crash or a big shift in values and that would be the time to seek out the best opportunity.  We have discussed, predicting things like this together with other crystal ball logic, so I thought I would use our conversation with her to offer a teachable moment.

I started to pontificate and told her what happened when I bought my first house in NYC.  At the time, and this was before this “student” of mine was even born, I thought I had paid through the nose. To further irritate my nosebleed, the best interest rate I could get was 14.5% back then and the mortgage had negative amortization.  It was crazy and everyone told me so.  Fast forward, 3 years later I sold that same house which I was told was in an area of the city that was supposed to be emerging, and I made a huge profit and repeated the process. 40 years later that same house is still in an emerging area and it just sold last year for 3.2 million. When I paid $65,000 people thought I should have had my head examined.  But here’s the point of this conversation. Over the course of 2 generations, I am sure there were a few dips in the market.  But the thing to remember is the trend was always in an upward direction.  There may be a momentary stall and even with recessions we sometimes see buyer’s markets shifts where it appears like you are getting a much better deal.  The thing to remember is the trend is almost always upward.  Trying to out think the market is usually a fool’s game and forces one  into becoming really lucky.  The luckiest investors I have ever known taught me that the only way to beat the market is to buy and buy now. Over the long run they pretty much always do better.  How much higher can prices go? Well, aren’t they stupid high now? Yes, they probably are, but they can always get crazier over time. (and they typically do.) It will always come down to the economic laws of supply and demand.  And as Will  Rogers used to say about Real Estate, 

“Buy (land), they ain’t making any more of it.”