"What Do You Do In A Down Market"

“Computers will never replace the rolodex”, and “air conditioning will not catch on in Florida”. There are other predictions that should cause you to wonder what planet some otherwise bright people ride on. If the above headline were to read “real estate prices will go lower”, I confess that I wouldn’t know the answer. Some real estate prices will go lower, though I believe only temporarily. Most prices will go higher, and in almost every case, much higher.

The truth is, Florida real estate prices haven’t been this low in ten years. Mortgage rates are as low as most of us can remember, and sellers are not at all demanding about terms. They can’t afford to be. Any real estate investor would say “Don’t be stupid. Buy when it is least expensive to buy, if you can.” (Most of us have already tried the “buy high, sell low” approach.) I submit that the question now is not whether or not you should buy, it is whether you can buy.

Don’t buy something you cannot hold. But If you have the opportunity to buy an income property that will hold itself until the market stabilizes, do it. If the price is so low that you can buy and hold the asset without threatening other commitments, do it. If you can buy a real estate asset and with your own energy or reasonable investment increase its value, either to get rid of it quickly or to hold it over time until its value comes back, do it.

Watch every great investor. In a bad market, he or she will lose money, and if the market really falls apart, he may lose more money than he can afford to lose. But he won’t stop. He will gather himself, learn from the experience, and get back in the market. He may take slower and more conservative steps, but he (or she) will get back, both by personality and because he knows that only future gains will make up for past losses.

There is a reason big banks and financial interests are building investment pools to buy into the mess they’ve made. Even if they don’t have the resources to buy and hold, they are pooling their resources to recover losses by taking advantage of low- cost money and the low cost of cast-off assets. You should too.

Please don’t misunderstand my advice. Spending is different from investing. Those who believe I am suggesting a rampant return to consumerism haven’t seen the car I drive. Even if you have committed to heart the difference between spending and investing, don’t make speculative or risky investments unless you can afford the loss if it doesn’t work. Don’t borrow all or even most of the money unless you can afford the interest payments while you hold the property.

But we all know, or can learn, the cost to build. We also know that neither residential nor commercial buildings will be offered on a long term basis for less than the costs to build them. We also know that quality construction and location will always have demand.

There are some signs about what to expect in national economic trends, even as far out as several decades. You shouldn’t like most of those signs. Nevertheless, if one day it is truthfully said that the first ten years of this century ruined us financially, it will be because we couldn’t, or wouldn’t get back in the game. Again, please understand. I don’t know the circumstances of each person reading this article, and therefore this is not whole-body- in advice. But at the risk of mixing my metaphors, if you’re reading this, you didn’t drown. Get back in the pool.