The Real Estate Game Right Now Is A Bust
I am always preaching positivity and self education as the ultimate guides to success. I want to educate you right now on a very popular and trending topic for investing right now, real estate. You are seeing it everywhere, on TV shows, the news and pundits speaking about how you need to invest now. Well I am going to give you the honest truth right now as someone who has invested in real estate in one of the countries toughest markets, NYC. Right now in this particular cycle DONT DO IT. Yes I am emphasizing this part because what all these TV shows and pundits all leave out of the equation when telling YOU where to invest is that it is YOUR money. You don't have to invest it anywhere but in yourself and what you believe in.
For the sake of this argument though why not invest in real estate right now? Debt is cheap and liquidity is around for re selling. I tell you why real estate is a ten too twenty year picture. It is something that your kids and you will see greater rewards from later on in life. That is what it is MEANT to be. Real estate is not a quick financial product that you turn $10,000 too $750,000 over night. It is a long term cash flow and improvement situation and not just your property but the surrounding area as well that takes time.
Currently a lot of money buying up real estate and supporting debt payments in core cities is foreign capital. Lots of it, it is coming in because they are stashing it because some are making so much money they need to. It is everyone from the super rich to the middle class overseas, they have a lot of money and they need to get rid of it. They pay cash because they view it in terms of getting 50 cents on the dollar is better than losing all of it to political turmoil. The way things can operate in other countries is no one is sure what banks or governments will do. We experienced this ourselves in the US during the 2008 financial crisis when money markets dried up. So real estate especially in the US and UK is deemed safe because it is yours. When you pay cash no one can take it from you.
This leaves you the regular investor outside core cities or in them shit out of luck when they stop. When prices in the core cities collapse its due to a larger issue and over valuation, This will ripple out into the market in all verticals. That liquidity will be gone and your debt payments will be there and vacancy can rise. All that product built even if it is luxury has to get rented because owners are always paying taxes and bills on a property so they need some income coming in. This leads to drastic rental price reductions because of all the new inventory built during the time. This causes a ripple effect in the market with pricing pressure.
After these simple facts why do you want to ride out what can be one of the greatest asset price drops in history only because of astronomical highs? I don't know about you but I certainly don't need that stress. The entire situation in the US real estate market is over pricing and people unable to afford to buy a new home even with cheap debt and spending far to much on rent per month. What will happen is people will be unable to afford and move to where it is cheaper. Prices will depreciate both on the rental and sales side leading to a normalization in the market place. People keep saying its different this time, its not, overvaluation is a bubble and it can hit just as hard as the mortgage crisis.