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Is Real Estate Still a Good Investment?

Last week, we posted on the challenges currently in the housing industry. But with challenges come opportunities. This week we want to concentrate on the possibilities available today in real estate.

To begin with, we want to make sure we bring some reality to much of the talk out there. Is real estate truly a good investment? More importantly, is it a good investment at this time? Let’s take a look.

Below is a graph showing real estate compared to three other investments (the DOW, NASDAQ and S&P 500). If you invested money in each on January 1, 2000, what would be your return on October 1, 2009? (the last time I updated the chart)

ROI

As you can see, your return on your real estate investment would have outperformed any of the other three. Even in this decade, with all the problems in the sector, real estate was still a great investment.

Now the question of whether or not this is the time you should invest. Whether or not you are investing in gold, stocks, fine art or real estate there is a cycle the investment goes through. It is known as the cycle of investing.

As always, let me show you a visual to help make my point:

Graphof InvestmentsAt times of euphoria, prices are at their highest. When things seem bleakest, is when prices are best. It is as simple as the old adage: buy low, sell high.

So you can see that we are probably at the ‘point of maximum opportunity’ if we were to invest in real estate today.

Now, you may say- ‘But Steve-you told us last week that prices were still going to tumble in most areas!’ Yes, I did.

However, as a buyer of a big-ticket item, you must realize that cost is more important than price. Unless you will be buying all cash, you must take into consideration the expense of financing your purchase. It is that expense combined with the price that will determine the cost of the item.

Obviously, when talking about a real estate purchase, the expense of financing is the mortgage interest rate.

Tomorrow, we will look at where interest rates are and where they are probably headed.


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10 replies
  1. Vera Cappi
    Vera Cappi says:

    Real Estate is and always will be a GREAT investment!!!! The future escalation in equity along with the very attractive tax benefits have always remained in tact. Even if things seem a little bleak right at the moment, don’t look for the fast turnaround….focus on a sound safe future!!!!!

    Reply
  2. John Reinhardt
    John Reinhardt says:

    Steve,
    Your points are well made. My agents at Fillmore Real Estate in Brooklyn are using your graphs and charts to show the buyers that this in fact may be the best time EVER to buy. It’s all about the monthly cost…and it ain’t gonna get any better than this…Fuhgeddaboudit!!
    Thanks for showing us the way. You are a true beacon, and those that follow you will finish the year strong.
    In fact, since we’re using these tools, our sales are up 32% in November over last year and that’s coming off a strong October too.
    Business is there if you take it. Which of your readers are smart enough to grab it?

    Reply
  3. Tina Jagshi
    Tina Jagshi says:

    I personally know a few people who are in their late 40’s early 50’s that say that their biggest regret from their 20’s and 30’s is that they didn’t invest in Real Estate or not as much as they should have.

    Reply

Trackbacks & Pingbacks

  1. […] Buyers, Sellers Over the last couple of days, we have talked about real estate as an investment, financing costs (interest rates) and gave you reasons to buy now instead of waiting. It is […]

  2. […] Buyers Yesterday, we talked about real estate as an investment. At the conclusion of that post, we talked about the difference between the ‘cost’ of the home […]

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