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Wednesday, October 10, 2007

The "buy and hold" real estate strategy

This may surprise you, but I’m going to tell you something you HAVE NOT HEARD about the real estate industry from the mainstream press. I’m going to tell you WHY NOW is a good time to be investing in real estate… Either as your first home, or second home or even as an investment property. Believe it or not, interest rates are still at historic lows and better yet, property prices ARE coming down, and THIS is why I feel it is a GREAT time for those who would like to pursue one of the best investment opportunities available.

One should realize that real estate is a long term investment that with time will always increase – eventually. This has been the case throughout history. The mainstream media would have you believe that it is not a good time to buy, that we still have excess inventory, the potential for price deflation, and credit issues to worry about. However, it has also been proven that one cannot “time” any investment market. Those values on a daily, weekly or even monthly basis may go up or down, but overall, Real Estate has always trended up over the long term – returning better overall than any other investment index. The mainstream media has created a “self fulfilling prophesy” by preaching all the gloom and doom about the housing market. Many buyers are holding off not because they cannot find a home, but because of all the negative press.

Prospective buyers should avoid looking at the real estate boom of the 2002-2005 years when some enterprising individuals were able to make an extraordinary return on their investment within months or even days in some cases by buying and flipping properties. This was a product of the frenzy that grew as more and more people jumped into the market to “get their share of the wealth” being created. This was no different than the “Dot-Com investment bubble of the late ‘90’s… It is interesting to note that we just hit a new high on the Dow, the S&P and a 6 year high on the NASDAQ… Markets DO recover and prosper when more normal investment strategies take place.

The prospective Real Estate investor should instead look at the more recent history of 2006 and current market condition of 2007, one should not focus on the negative news that the media projects in this real estate “bubble” As with any frenzy, there is a time when prices are at their highest and are no longer supported by prudent consideration. Again I refer back to the Dot Com days when people were buying stocks in unprofitable companies with little capital – but the buying frenzy drove those values through the roof. In the light of day, the companies were not worth the value placed by the market and they adjusted downward once the frenzy faded in 1999. Likewise the “frenzy” in the Real Estate market faded as speculators left the market and prices no longer were driven by speculation and the lure of easy and low priced credit. Therefore values became more normalized. We have seen these corrections in pricing already resulting in some real bargains out there. What is more interesting is the availability of reasonably priced financing with Fixed Rates in the lower to mid 6% range and a good range of financing options available.

You may ask yourself, how can this idiot blogger say any of the aforementioned with all the negative news, and negative “expert” opinions about the housing market? Well, I am a firm believer in the “if it bleeds, it leads” notion that the media uses in their everyday business. That said, the housing market is gloomy, and tainted by negative press, and admittedly, facts. You can succeed in this creating wealth through real estate investments - If you follow prudent investment strategies and not make emotional decisions. Do your homework. Assess the market, the future growth in that particular neighborhood and seek the assistance of both a Real Estate Professional and a home financing expert first… don’t expect to make a quick buck… the best strategies are the “buy and hold” strategies that take advantage of the long term nature of this type of investment. Do not let your thoughts be hampered, and open your eyes to the tremendous opportunities that this market condition is presenting to your long term real estate dreams!

Make sure you choose a dependable professional that will be with you before and after the closing process, providing the funds and support you need. Don't be the Monkey Man...

Written by Michael Heiblum and Mason Pruner

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