Given all the changes and current trends in today’s market, do you still recommend real estate as an investment?

For many years, real estate investing seemed too good to be true. Things changed for us during the bubble years 2004-2009 in that prices were rising beyond what we could determine the properties to be worth. The sale prices seemed to be disconnected from the rental values. To us a property’s value is determined solely on the income it will generate. We have never believed that a deal should be made based on tax benefits or in hopes of appreciation as we consider these benefits to be icing on the cake.

   Nevertheless, we do remain an advocate for real estate. It needs to be understood as we have said many times, ”real estate is not idiot proof”, but for the informed investor it is a sound and solid investment. Looking at the total basket of investments choices available today, we believe real estate remains among the best of alternatives for the following reasons:

ü  As the owner, you have control. You can be ‘hands on’ and take action to improve the marketability or desirability of a property.

ü  It will yield a return. Even if today’s price is slightly lower than yesterday’s, you know the property will rent at some price.

ü  Rental demand can be expected to remain strong for the foreseeable future. Today’s homeownership rate is down and many of these folks will not be eager or able to own their own home again anytime soon.

ü  Real estate is on sale and for that matter so is funding. We definitely favor trying to lock in fixed-rate, low rate financing.

ü  Many of today’s valuation problems stem from an oversupply of homes in the market but we are confident that this trend is unwinding and reversing itself. After all, our building industry has remained idle for most of the past 3-4 years. We have new workers entering our economy constantly and even though family formation has been slow lately because of the employment market, we are confident that when the economy starts rolling again, there will be an instant and dramatic spike in demand for housing and this should spur a rebound in values.

Investors who purchase now will be in a great position in the future. Compared to the stock or bond markets, or cash in the bank, real estate is still the best game in town.