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REAL ESTATE NEWS - REAL ESTATE MARKET
Real Estate Growth: How Long Can It
Last?
by Motiva Group
There has been speculation in the media recently about
the fact that real estate will begin to fail and implode
as it can only handle so much growth.
In my humble opinion these theories don’t hold a
lot of merit and here is why. First, understand that there
are three basic things that undercut the validity of saying
that there is a real estate bubble that people are operating
in.
1. There is no “international” or “national”
real estate market
2. The real estate market doesn’t explode or crash
3. The market has limited impact on the seasoned investor
The Real Estate "Market" is an overall view
of micro markets nation wide.
When people talk about real estate economics they are
usually referring to national or international statistics
which in truth are made up of thousands on micro or local
real estate markets. So even though you might find a North
America wide trend there are still many, many markets
which will be completely at odds with the overall numbers.
Real Estate Markets do not “Crash.”
We all remember October 19, 1987, known as “Black
Monday.” The stock market lost 22% of its value in
one day - what investors call a “crash.” History
points to times which real estate values have taken 22%
hits in certain cities and in pockets within cities. However,
no real estate market dropped 22% in one day, one week
or even one month. In fact, the real estate “crash”
of the late 1980’s took several years to bottom out
in most markets.
Keep in mind too the overall performance of the real estate
market you are investing in. Those of you who have been
active in the Edmonton market the last few years might
think that the market is in a slump or downslide, when
in reality the numbers they are recording are far above
what the average of the last decade show.
The market has limited impact on the seasoned investor.
No matter if you are holding properties long term or doing
a quick flip, the local market changes will not affect
you in a major way if you are careful. For example if
you are doing long term hold revenue properties there
is little to no chance that the market will not increase
over the term of your holding period. If you are on the
other hand flipping properties then you will buy at a
higher price in a strong market and will move the property
quickly, or get a better price which will help you in
higher holding costs in a softer market.
Now, just as a side note for those of you looking at holding
properties for future value considerations. If you are
buying negative cash flow properties with the expectation
of equity increase over 2-3 years then, in the words of
a recent article that I read, SHAME ON YOU! If you are
using investor’s capital to close these deals and
the value doesn’t increase what are you going to
do? What if the value decreases in that time? You are
putting investor’s capital at risk and as far as
I am concerned are acting as an irresponsible speculator,
not a seasoned real estate investor!
About the Author
Motiva Group teaches people how to invest successfully
in real estate and are the developers of the "Zero
Down in Canada Real Estate Investment Home Study Course."
Their web site has many free reports and articles on real
estate investing.
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