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The Most Important Question in all of Real Estate

Last week I spoke to a group of auditors and accountants. When I finished a question was asked that I had not thought about, but was what the entire discussion should have been about The question was, ….” With all the discussion about bad times in the economy, is there any money still to be made in real estate”? My answer was, absolutely. Ironically, had the question not been asked, the most important message that could have been discussed would have been overlooked. The truth is, there has never been a better time to make money in real estate.

Real estate prices will not stay lower than the cost to build. Today they are. Unfortunately, there are many professional investors who can tell you more about making money in real estate than I. I can only share my thoughts, forged over many years of losses. This is sort of like my friend Bill Clinton giving marital advice. But he is still married. Who would have thought Al Gore would be the first one divorced?

Nevertheless, if this is really a good time to invest in real estate, there must be a way to do it, right? To start, I suspect you do not have to be creative, or designer, or even unusual. You can buy real estate “off the shelf”, at something like the offered price, and if you buy something you can use and hold, you will not be disappointed. You need to live somewhere. The house you live in has never been available for a lower price, and it will not be again. How do I know that? Only because now it’s being offered, generally, for less than the cost to build. That pattern will not last. We know that because builders will not continue to build at a loss. They can’t. If you need it, buy something you can afford and be proud to have it. Fix it. Love it. Make friends with your neighbors, because if it is truly an investment, you will own it for a long time.

The key, if you do this successfully, is to be able to hold what you own. Live in it. Work in it, or rent it out. But don’t ever buy thinking you can give it back to the bank if it doesn’t work out. That may work on some basis for stuff purchased during the Silly Years, but there’s no room for error for things bought today. Be ready to hold the property and have a reasonable plan to pay for it. Then, if you buy it at today’s prices, you can’t lose. Billy Teel, the dean of appraisers in Okaloosa County, once assisted me in teaching a class in real estate. He told the class that an investor does not make money selling his real estate. He makes his money, if it is to be made, when he buys. If that’s true, and if you can afford to buy intelligently, you’re wasting time to not be in the market, right now.

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