Just about everybody wants to make it big with real estate. People envision themselves as the next big real estate tycoon. Buying property gives the owner a sense of pride that is unparalleled, and people hear about another savvy real estate investor all the time. There are other ways to gain wealth, but none hold quite the allure that real estate does.
Understanding the benefits of real estate
Owning real estate is not for the totally risk-averse. Nor is it worry-free. No investment is. Look up the definition for savvy and it says “experienced, knowledgable, and well-informed; shrewd”. The savvy real estate investor understands why it is such a great vehicle to achieve their long-term financial goals. Gary Keller spells out what an able investment it is in his phenomenal book, The Millionaire Real Estate Investor.
- Accessible. Anyone can buy it.
- Appreciable. Increases in value over time.
- Leverageable. Buy on margin or borrow against equity.
- Rentable. Cash Flow! Cash Flow! Cash Flow!
- Improvable. Sweat equity.
- Deductible/Depreciable/Deferrable. Great tax benefits.
- Stable. Slow to rise & slow to fall.
- Liveable. Shelter in more ways than one.
Know your plans before you purchase
Do not enter into a real estate investment without doing your homework first. Work with an agent who knows owns investment properties, has helped others buy them, and can explain the entire process in detail. Winging it is a surefire way to make a poor decision, and that’s true regardless of what you’re investing in. People want great returns on their investment, and here’s the recipe in three short steps:
- Buy when it makes sense.
- Improve the property as needed.
- Give it time.
We all would love to have a no-risk, high-yield, fool-proof investment that would allow us to retire and live a carefree lifestyle, continue to increase our wealth, and donate generously to worthy causes. Who wouldn’t? That’s a fantasy, however, so let’s get back to reality. Buying and hoping is no strategy — it’s more like going to Vegas and expecting to beat the house.
Do the opposite of what most are doing
Ever wonder why buyer enthusiasm is so high in a Seller’s Market? The name itself states that the benefit is to the sellers, yet buyers are often going bananas trying to buy everything in sight. Why? FOMO, that’s why. The market is crazy, everyone they know is buying, and they want in on it. It’s called a “Seller’s Market” for a reason.
And in a buyer’s market, buyers tend to be less motivated to buy. They drag their feet and hold off on purchasing, waiting for something better to come along. Even when they know they can buy a property for less than they could have in a seller’s market, they often don’t. Why? FONGAGD — that’s my made-up acronym for Fear Of Not Getting A Great Deal. That great deal is likely staring them right in the face, but because it’s not a hot market and they don’t see others buying, they often wait until the market starts getting hot again — or worse yet never buy it at all.
They call it savvy for a reason
The best time to buy is in a Buyer’s Market. Demand is down and supply is up. Now is one of those times, and they don’t last forever. You’ll need some fortitude when naysayers start asking, “Why are you buying now?” Whether you’re deciding on continue to rent vs buying or thinking of making another purchase, don’t be a sheep mindlessly following the herd.
Let me ask you this: Would you rather have purchased an investment property in 2006, or 2011. Why? You likely came up with your answer pretty quickly.
The reply back to those naysayers should be, “Why aren’t you buying right now?” Rare is the real estate investor who bought in a down market and struggles, while there are too many instances to count of those who bought when the market was flying high, only to see their real estate dreams come crashing down.
Hindsight is always 20/20. But foresight is for the savvy real estate investor who looks past what everyone else is doing, is comfortable making their own decisions, and lives to enjoy the many financial benefits of zigging when everyone else is zagging. Don’t be the sheep.
Final word on being a savvy real estate investor
Any investment involves risk. Many people who have killed it in real estate started with no properties at all — they learned about what to do, how to invest and improve them, then either sell or hold them — and have gone on to become exceptionally wealthy. The signs are there right now that it’s a great time to buy, making you a savvy real estate investor as well.
And by the way, interest rates are at near-record lows.