I have been asked to write today concerning the current US financial crises and investment real estate. Even as the main stream media and most government officials tout that the American wealth is located in the equity in our homes, most informed investors know this is not true. Holding wealth in equity is not holding wealth at all but a gamble that people at a future date will pay more for the same real estate we bought at a previous date. Recent events show that this is not always true. Your home is a liability not an asset especially if you have a mortgage on it.
Anything not putting money in your pocket each month is a liability not an asset and not wealth. Many investors have made very good money in speculation but this is always short term and never the sole source of real estate income for non-professionals. Speculation is very risky and by the time the public gets involved the wave is over. Wealth in real estate is always created in the form of cash flow. We do not necessarily purchase the property but we purchase cash flow, we purchase an income stream.
In recent events in our economy those who own real estate rental income streams have seen income increase as rents go up. Rents are up because demand is up. Demand is up because of an inability to purchase or obtain financing. If you where making a 10% return on your rental property in 2005, chances are your making 10% or better in 2008 no matter what the value of the real estate is today. History shows us that if you hold the real estate the value will come back. In essence you have not lost money because you didn’t buy the real estate you bought the income.
Yes I here you” what if I need to sell it and I can’t?” or “I owe more on it than it is worth”. Look, first of all real estate investing is not get rich quick, and each one of us owe it to ourselves and our families to invest long term not short term. Only highly effective, professional real estate investors should speculate. You make money when you buy not when you sell investment real estate and there are many ways to get around selling a piece of investment real estate at a loss if you purchased it correctly. Secondly if the income stream is managed properly, taking into account all true expenses, inflation and preventative maintenance then the value of the income stream should never diminish no matter the market conditions.
I understand many investors have had to make some sacrifices. I know many of you may be in a tight spot right now. What I want those of you to know is that the knowledge and experience you have gained cannot be taken from you or replaced. The next time you build your real estate fortune you will not make the same mistakes you previously made, like over financing, over extending, spending your capital fund or whatever the case may be. There is no shortage of money out there it’s just a shortage of confidence. Even if someone cannot get a bank loan there are many other ways to raise capital to purchase a good income stream. Investing in real estate income is insurable, it is effective and it is fun. It is still the best investment in America because it is an investment in America. In this market it is essential that we as investors do not start talking like the main stream media. We need to keep a level head, sure up our income properties and get ready to buy. The last quarter of this year will be spectacular for acquisitions. Stay positive, never let them see you sweat and the next time you walk into your local bank tell your banker not to worry. We are the cornerstone of the American economy
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