An excerpt from The Doctors Guide to Real Estate Investing for Busy Professionals.
I left my 20-year general surgical practice at age 51, only 12 years after buying my first apartment complex. By then, my real estate investments were producing more passive income than I was spending. I no longer needed to work. During those 12 years of real estate investing, utilizing about 10-15 hours a month of my time, I was able to create more wealth and passive income than I had in 20 years of investing my surgical income. In fact, only a few years after my first apartment purchase, I noticed I was building more wealth in real estate each year than I was earning as a full-time surgeon.
A lot of people ask me if I think now is the right time to buy investment real estate. The answer to that question is always YES! You see, it is always a good time to buy investment real estate. It might not always be a good time to sell, but it is always a good time to buy.
The real premise behind this question is that buying investment real estate is never about timing the market. Frankly, it is impossible to time the market. We should all have learned that with the stock market. The same is true for the real estate market. There is no way to tell if a market is at the bottom or still dropping. There is no way to tell if a market is at a peak or still climbing. Since there is no way to time the market, stop wasting your time trying. Leave that to the real estate speculators. You want to become a real estate investor.
There is a big difference between real estate speculators and real estate investors.
Let’s go back in time and imagine a real estate investor struggling with this question in 1975. I mentioned in chapter 1 that the median home value in 1970 was $17,000, and in 1980, it was $47,200. As of this writing, the median price is in the neighborhood of $226,000.
It’s now 1975, and you are standing by the water cooler, talking with someone who is considering making her first real estate investment. The market in your area went up last year, so the median price in your area is $30,000.
The discussion is about whether or not now is the time to buy. Should you wait a little longer or strike now? What if the market drops next year? Then it would have been better to wait and buy the property next year.
At the time of the discussion, whether you bought a property at $20,000 or $30,000 seemed like a big deal. If you were right and the property dropped 30% in value, and you picked it up at the lower price, wouldn’t that be a great deal?
The answer is, maybe. It doesn’t matter that much if you buy it at $30,000 or if you buy it at $20,000. Here’s what matters: when you buy it, you can make positive cash flow from that investment, and it is now in your portfolio. You own it and it is making money.
If you had been that person, like my grandparents were, how would that question appear today? With a median home value of $226,000 today, do you think it made any significant difference whether you bought the property for $20,000 or $30,000? The answer is no. For all practical purposes, they are the same. Both options made money and a lot of it, if you made the purchase. Neither option made money if you held off and never made the purchase because you were waiting for the market to bottom out.
You want property for the cash flow and long-term growth in your investment portfolio. If you buy a good piece of property for the long haul, you will make a great profit. Long-term investing is the key. Speculators are thinking short term.
What does happen in the good and bad years is the change in availability of good properties. In a super-hot market, all the speculators are scarfing up property so fast you can’t get to them. Therefore, super-hot markets are not ideal for investors. But if you find a good deal, you should still take it.
The down markets will be slow enough for you to take the time to evaluate properties. There will be more positive cash flow properties when the prices are down and less when the prices are up. You need to find the good ones, either way.
Cory Fawcett is a general surgeon and can be reached at his self-titled site, Dr. Cory S. Fawcett. He is the author of The Doctors Guide to Real Estate Investing for Busy Professionals, The Doctors Guide to Starting Your Practice Right, The Doctors Guide to Eliminating Debt, and The Doctors Guide to Smart Career Alternatives and Retirement.
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