Many people are asking me if it’s still a good time to invest in real estate. My answer is the same whether the market is up, down, or sideways- It depends! You may think that I took the easy way out, but the word “time” is of the utmost importance here. Could the real estate market “crash”? Of course it can! However, the question that you should be asking is, “has it ever crashed before”? (It sure has!!) and if so, “has it recovered each and every time“?
The answer; Yes it has! Real estate has recovered each and every time it has crashed.
So what to do if you believe it will “crash” soon? (I don’t think it will in 2018, but I will discuss that in a future post.) The answer is, adjust your time frame for return on your investment (ROI). Maybe you can’t flip a house for profit right away. Maybe you will have to buy and hold your real estate and work on making your real estate profitable over time.
A wise strategy for this is to find properties that make good rentals in good times and in bad. You can find out what makes a great rental property online. You should also avoid land unless you have a very good exit strategy. Land is one of the least liquid of all real estate assets. In other words, it usually can’t be sold quickly. Investors tie up lots of cash (liquidity) in land, and have to double-down on their investment in the form of development fees, taxes and other costs without any offset in rental income.
If you believe the market will “crash”, you should hold on to as much liquidity (cash) as you can, so don’t tie up too much cash in real estate. In down times, equity, which is the value of your real estate minus the debts owed on it, is harder to access, so it doesn’t translate to cash as easily. You will need cash to go after the screaming deals that will come your way in a real estate “crash.” This will be your reward for being patient, smart, and diligent during the good times.