Can Real Estate Still Be a Good Investment?

That’s a question we are all asking today. Why? Because of the many stock market investors who speculated in real estate, the problems surrounding sub-prime loans with the resulting foreclosures and bank failures, and falling home prices.If the late Dr. David Schumacher, my mentor for the past 10 years and author of the now-famous book, The Buy and Hold Strategies of Real Estate, were still around, I know what he would say because he said it during the last downturn in 1990-1995. He would tell us not to worry. This is only temporary and part of the normal cycle of real estate.It creates bargains that can benefit you. This cycle has been happening since Montgomery Ward began offering homes for $1,500 through its catalogs. As sure as the sun rises and the seasons come and go, real estate will make those who own it rich over a period of time. He would add that now is the best time to get great deals in real estate.The Real Estate Cycle
Real estate is still the best investment possible. It always has and always will do well in the long run.This is the fourth real estate cycle I have been through and none of the downturns were fun. However, if you have patience and look at the long term, your real estate will go up in value more than any other investment. Do not treat real estate as you might treat the stock market, worrying about the ups and down.Since 1929, real estate has gone up an average of five percent a year; if you stay away from the obvious non-appreciating areas like Detroit, it is more like seven percent a year. At that rate, properties will double in value over 10 years with compounding. Add a federal tax benefit of 28 percent plus state tax deductions, the depreciation write-off for rental property, and the eventual pay-down of the loan and you have a strategy rich people have always used to accumulate wealth.Flippers
Over the past 30 years I have watched many flippers who buy, fix up, and sell. I do not know many who have much net worth or are wealthy because of flipping. It is simply a very risky way to make money.Those who have prospered are the ones who are in it for the long haul and patiently watch their properties increase in value over time. This past downturn was created by speculators who all flipped at the same time, putting too many properties on the market for sale and rental. I guarantee that over the long haul, you will always regret selling any property you have every owned.Buy and Hold
Since time passes by anyway, the buy-and-hold strategy is a great way to become rich. Dr. Schumacher experienced at least five real estate cycles and did extremely well, acquiring an eventual net worth of over $50 million.You just can’t go wrong in purchasing an inexpensive condo, townhouse, or single-family home in a good location where there are jobs. Make sure you have a fixed-rate loan, make sure it cash flows, hold on to it for 10 to 20 years, and you have a property that has doubled or even quadrupled in value. When you need to retire, simply do a cash-out refinance to live on or to supplement your retirement pension.For example, the first property I purchased for $75,000, a townhome in Lake Arrowhead, CA, is now worth $650,000. My first oceanfront condo, which I purchased in Long Beach, CA, in 1982 for $112,000 and used as my residence, is now worth $500,000. One-bedroom condos I purchased in Maui, HI, in the late 1990s for $80,000 are now worth $400,000. Homes I bought around the same time in Phoenix, AZ, for $75,000 are now worth twice that. I could go on and on and on.What are your Options?
What are your options to building wealth today? The options are to buy real estate and build wealth or to not purchase property at all, to struggle a lot and have nothing to show for it.1. You could do nothing. The 25 percent who do not own a home end up with no assets when they retire. They have a car loan and owe an average of $9,000 on their credit cards. Those who do not purchase rental property may be forced to work past age 65 to supplement their meager retirement income.2. You can try to depend upon your retirement. The above chart shows that you should not depend on your retirement income alone to support you, because it won’t. Those on Social Security or most retirement programs end up living below the poverty line and are forced to work until they drop, so that is not a solution. Other investment options are not doing so well, either.3. Invest in the stock market. We are definitely in a slowdown (I refuse to believe we will have a recession), so the stock market is not going to do well for several more years.4. Invest in gold and silver. They have already made their run; it is doubtful they will do much better. Gold and silver are used as a hedge against inflation and a weak dollar. It looks like oil prices are headed down and the dollar is strengthening.5. Invest in real estate. Those who invest in real estate almost always do well. The following graph shows how the top one percent in income have acquired their wealth. As you can see, the vast majority have invested in real estate.Don’t Think Short-Term
Real estate is not designed to be considered short-term. Right now, real estate is going down in value in many cities, but it is going up in many others. It is a terrible time to sell and pull out any equity. Only about five percent of the properties are for sale. Most homeowners and investors are simply holding on to their real estate and are waiting for the next upward appreciation cycle.The Four Greatest MISTAKES People Make in Real Estate
Real estate always does well when purchased correctly. It is people’s choices and sometimes greed that mess up an almost perfect investment.MISTAKE #1. Purchasing Property That is More Than One Can Afford
Often individuals are attracted to and purchase a home they cannot afford. They struggle their entire lives just to make the payments. Then if they have an illness, job loss, or divorce, they are in big trouble.MISTAKE #2. Buying Properties That Don’t Cash Flow
When rental properties are going up rapidly, everything seems desirable and people purchase rental properties that don’t cash flow. Often that can lead to disaster with large, negative cash flows when the market softens. Properties that cash flow are a no-brainer. They are great no matter what happens. These are
the ones you want to buy and hold. Eventually they will be paid off.MISTAKE #3. Refying Too Much Out
When prices are going up, one is tempted to take out the maximum amount allowed on an equity line on one,s home or do a cash-out refi on a rental property. That is dangerous if one cannot make the payments or support the negative. It is like abusing one’s credit cards, which often ends in bankruptcy.
It is especially discouraging when values drop below the loan amount, as is happening with many homeowners right now. One should not get discouraged, they will eventually return to their original value and then surpass that, usually within 2½ to 4 years.MISTAKE #4. Getting the Wrong Loans
We have all seen the problems with sub prime loans. Those with low incomes were not the only parties using these loans. Some bought million-dollar homes in a gamble that they would up in value. Five-year Option ARMS also became popular, but they caused major problems to the investor when they reset. Loans like these should be refinanced as soon as possible. The same is true for adjustable-rate mortgages. Fixed-rate loans are the only suitable loan type for anyone who plans to hold on to his properties.

Second Quarter 2008 Shows Good News
Sales are up in 13 states, especially in the states hit hardest (California up 25.8%, Nevada up 25%, Arizona up 20.5%, and Florida up 10%), a strong sign that the market has bottomed and is returning to normal.In addition, 35 cities across the U.S. show an increase in prices from the first to the second quarter. Yakima, WA, rose 9.9%; Binghamton, NY, rose 8.7%; and Amarillo, TX, rose 7.2% from a year ago.Conclusion
It is never fun to be in a down cycle and see the equity in your home and rental property slip away. However, do not be discouraged, this is just part of the cycle of real estate.These down cycles are always good times to pick up more property at great prices, but be sure you keep a reserve for unforeseen problems (such as illness or job loss) so you can still make your payments. Make sure you purchase good properties in good locations, priced below the median price for the area, in markets that have good job growth.Properties will return to their 7-plus percent appreciation and then you can watch your wealth build once again.So, don’t worry. Real Estate is still the best long-term investment.

Alternative Advertising Almanac (D-O)

Daily effective circulation (DEC)
-The average number of persons passing and potentially exposed to an advertising display for either 12 hours (unilluminated) or 18 hours (illuminated).Daily impressions
-Also called DEC, these are the estimated number of persons passing an outdoor location on an average day.Degradation
-The standard method used to express the life of a display is the time it takes to reach 50% of its day one brightness.Dimming
-Changing the brightness of a display, or the capability of increasing or decreasing the overall display intensity. The brightness level should be highest during the day to compete with daylight, and lower at night.Display period
-The interval of exposure when an outdoor advertising campaign is viewed.Dissolve
-A mode of message transition on an LED display accomplished by varying the light intensity or pattern, where the first message gradually appears to dissipate and lose legibility simultaneously with the gradual appearance and legibility of the second message.Distribution
-The strategic physical placement of outdoor units across a market.Embellishment
-Letters, figures, mechanical devices, or lighting that is attached to the face of an outdoor unit to create a special effect.Expected lifetime
-Anticipated length of use for an LED. The expected lifetime of an LED is measured at the point when the sign has degraded to 50 percent if its original intensity. LEDs have a typical expected life of 50,000 to 100,000 hours (as specified by the manufacturer).Exposure
-The reasonable opportunities for advertising to be seen and read.Face
-The surface area on an outdoor unit where advertising copy is displayed. A structure may have more than one face.Facing
-The cardinal direction that an outdoor unit faces. For example, a north facing unit is seen by consumer headed south.Flight
-The length of an advertising campaign, sometimes divided into distinct segments over the course of weeks.Frequency
-The average number of times an individual has the opportunity to see an advertising message during a defined period of time. Frequency in outdoor advertising is typically measured over a four week period.Gamma correction
-A process used with video images to correct brightness and internal micro-contrast within the image. Gamma correction allows a change of ratio between the brightest red component and weakest red.Global positioning system (GPS)
-A location system using latitude and longitude to pinpoint exact geographic locations.Gross impressions
– The sum of the impressions registered against a target audience based on a GRP level of days or weeks in a schedule.Gross rating point (GRP)
-The total number of impressions delivered by a media schedule expressed as a percentage of a market population. One rating point represents a circulation equal to 1% of the market population.Illuminated
-An outdoor unit equipped with lighting that provides night time illumination of an advertising message, usually from dusk until midnight.Impression
-The number of people who have an opportunity to see an ad in a given period of time.Imprint
-The identification of the operating media company on an advertising display.Indoor Advertising
-Advertising displays located in restrooms, retail locations, restaurants, and other high traffic indoor areas.Intensity
-Also called brightness. The LED industry measures display intensity in candelas per square meter, which is also referred to as nits.LED brightness
-The brightness level of an LED is measured in milli-candelas. The materials used to manufacture the LED determine the brightness of the LED.Light detector
-Also called light sensor, a light detector is an electrical component used to detect the amount or level of ambient light surrounding a display. If dimming has been set to “AUTO,” the light detector or sensor adjusts the intensity of the LEDs.Light emitting display (LED)
-Also known as Light Emitting Diode, LED is a semiconductor device (akin to a small lightbulb) that emits narrow-spectrum light when given an electrical charge.Line of sight
-The simultaneous viewing of more than one copy area of one outdoor unit.Location list
-A listing of all locations included in a specific outdoor program.Location map
-A map showing all locations included in a specific outdoor campaign.Mandatory copy
-Copy that is mandated by law to appear in the advertising of certain products and services.Milli-candela (mcd)
-One thousandth of a candela.Net reach
-The total number of people within the target audience exposed to the advertising schedule, often expressed as a percentage.OBIE
-Awards Issued by OAAA, OBIE Awards are the oldest awards for outdoor advertising creative.Off-premise sign
-A sign that advertises products or services that are not sold, produced or furnished on the property where the sign is located. An outdoor advertising display is an off-premise sign.Outdoor Advertising Association of America (OAAA)
-A trade association that leads and unites a responsible outdoor advertising industry. It is committed to serving advertisers, consumers, and the public.Override
-The continuation of an outdoor advertising program beyond an advertising period. An override, if offered by an outdoor company, is provided at no additional cost to an advertiser.