The Real Estate Bubble Fallacy

There has been a lot of talk lately about the “Real Estate Bubble”, and a lot of folks are asking the question: “When it is going to burst”?

They are saying that the market just can’t sustain this level of growth and appreciation much longer, and I heat them say that it is inevitable that it must come crashing down soon. People are worried. They don’t think it can last; That whatever goes up, must come down.

These folks have been conditioned to believe what they believe most likely from the experience of the stock market bubble of 2000, and maybe the 1990′s when the real estate market was hit hard in many large metropolitan areas across the country.

Its human nature to feel this way. We all know the saying (or the 80′s tune for you big hair folks), “Once Bitten, Twice Shy”. Or what about, “All good things must come to an end.”? Its how we react to almost everything that affects our well being and general safety. Its a subconscious reaction at the gut level.

Just like in the stock market, there are bulls and bears. Bulls are typically more optimistic about the market and expect it go up, and bears are generally more pessimistic and expect the market to go down. They will always be there to provide free advice and “expert consulting”. Remember though, who you decide to listen to will certainly have an effect on your decision making, and ultimately your success.

Well, I’m here to say that there is no real estate bubble! There never was a real estate bubble. Its a complete and utter fallacy.

“How can I say that?” you ask. I can say that because the real estate market is in reality, a Wave. Its a cycle, and we just happen to be riding the big swells, or the crest of this long, consistent, and fairly predictable pattern.

There is no doubt that real estate has been a rock solid investment for decades, and will continue to be for the foreseeable future and for many reasons that I would like to demonstrate here and now. Because you, as a real estate investor, must be able to move forward with confidence when deciding which projects and properties you want to buy and sell. That is the purpose of my website, www.realestateinvestment.net [http://www.realestateinvestment.net], to provide you timely information, strategies and techniques to help you succeed.

But first, what is a bubble? In terms of economics and markets, the best definition is probably something along the lines of “an isolated or ephemeral situation or condition with little support or substantiation from external conditions”.

The best example, and the one foremost in the minds of us all, is the stock market tech bubble of 1999 and 2000. We all rushed into the tech stocks and the stock market in general as we saw the .com millionaires being made.

Y2K was a big factor in the tech bubble. People were buying new systems at a unprecedented rate in order to prepare for doomsday. People were also buying consumable goods to stock up for the dreadful event that never came.

So what was holding up, or supporting the “irrational exuberance” as Alan Greenspan characterized it? Well, we learned soon afterward, not much. It was an isolated, temporary incident that had little support from the other conditions. It was indeed like a bubble that burst.

And it has had little support since then. Historically speaking, after the stock market crash of 1929 and 1987, it took decades for the market to recover, although it did eventually recover. Just look at the Dow average and the S&P average for the last hundred years and see the pattern of recovery. You can be sure that a slow steady rise for stocks is in progress.

Now back to real estate. Let me explain why this is not a bubble.

Real Estate is Cyclic

Real estate has had its ups and downs over the years, but it is generally stable, with no drastic swings per se. If you were to look at the cycles on a chart you would see a clear pattern of gently rolling swells. This pattern is consistent across cities and regions all across the United states, although slightly varied in degree.

In addition, the cycles tend to favor the ups rather than the downs. It is not uncommon to see large cycles of appreciation and much smaller downward cycles. In other words, the current double-digit growth we’ve all come to know and love in recent years will likely be followed by downturns of single digit declines. Its like taking two steps forward and one step back.

In the big picture you will still be further ahead than when you started. You may see slower growth, but it will still be growth.

Real Estate is a Basic Necessity

People need to live somewhere. They need a roof over their head and their children’s heads. Like food and clothing we must have a home. People don’t need stocks or bonds. Therefore, you can be sure that whether the market is high or low in growth, whether interest rates are up or down, people will be buying, renting, leasing, and selling homes. It is as perennial as the years.

This Real Estate Wave Has Been Around Awhile

I don’t know when you first realized we were in an up market in real estate, but it has been on a solid upward trend for at least the last 3-4 years. It didn’t just happen yesterday. Of course like anything else, awareness of the general public is a bit latent, and dependent upon the media. It has only been lately that the media has really focused on it and thrust it onto the front page.

The old adage “Success breeds success” is also true. The momentum will grow as other more traditional investors continue to jump on the band wagon and pour their money and resources into real estate investment. It tends to create a perpetual, self-feeding market that is ideal for more seasoned investors.

Real Estate is Local and Regional

It is true that even in today’s real estate boom, there are areas in the United States that are not enjoying the high rates of return that others are experiencing. California is a fantastic place to invest, so is Arizona and a host of other places.But the Rust Belt states are not as fortunate. Watch what happens to Florida home values after this horrendous hurricane season. This is because real estate is driven by the primary capitalistic force of Supply and Demand.

Generally speaking, property values increase in areas where the job market is strong, and where there are more people moving into than away from. Of course there are other factors to consider; including interest rates, availability of funding, climate, and governmental policies. These are all important and you must be cognizant of their impacts to your strategy.

However, it is true no that matter what the rates are or how nice the climate is, people will continue to migrate where there are abundant job markets and affordable housing. If you can stay just slightly ahead of that migration, you will profit immensely.

Real Estate Investing is Diverse

You can invest in so many different ways, from foreclosures and fix and flips, to buy and hold and everything in between. Right now the commercial space is relatively soft. It will recover no doubt, but people investing in single family homes are probably doing slightly better in returns. Vacancies are up and rents are down for commercial properties, but fortunately, the forecast is for this sector to improve over the next few years.

The key to successful real estate investing is to understand the forces, trends, and conditions that are driving the market. BE AWARE of your surroundings; Read articles and stay on top of industry news; Look in your own area at the job market and forecasts. Check my website www.realestateinvestment.net [http://www.realestateinvestment.net] for all the news and information you need to help you succeed in your real estate investing career.

There is no real estate bubble, but there is a real estate wave. Like any dedicated surfer, when the surf’s up, get in the water and catch a wave! But watch for danger, be flexible, and be smart. Invest wisely and you can prosper in any real estate market.

Real Estate Investing Skill Acquisition

Real estate investing is not in any list of high school electives. You can’t get an accredited degree in real estate investing. You won’t find a high school or college guidance counselor who recommends a career in real estate investing (if the guidance counselor understood real estate investing, he or she probably wouldn’t be a guidance counselor!)

The public school system and educational curriculum in the U.S. is only a feeble attempt to prepare students to just “get a job.” Unfortunately there is no class in “Making Money 101.” You don’t have the opportunity to take a class in “How to Become Financially Independent.” No teacher ever taught a class in “How to Succeed When Everyone Else is Failing.” I never learned anything about succeeding as an entrepreneur or becoming wealthy during my 10 years in the university classroom. I only became a multi-millionaire when I learned the skills of real estate investing, and I paid the price out-of-pocket and out-of-the-classroom for that education. I learned these skills in the ole University of Hard Knocks through trial-and-error.

Never disparage the cost of education. There ain’t no free lunch. You’ve gotta get this know-how outside of a classroom, and learning how to make money is gonna cost you. But if you think the cost of education is expensive, you should calculate the cost of ignorance!

However, learning real estate investing doesn’t have to cost you an arm and a leg. Yes, I know, the real estate investing TV infomercials and the real estate investing seminars held around the country charge big bucks for those 3-day seminars and week-long Boot Camps. But that’s pocket change compared to the fees they want to collect from you later. Catch this fact: all the real estate investing infomercials and seminars target you as a candidate for “real estate investing coaching.” That’s where they charge you up to $25,000 and over $50,000 per year for “coaching.” And often you are assigned to some kid “still wet behind the ears” to call you each week or month to hold your hand and whisper in your ear what common sense and a persistent drive should already tell you! I’m not exaggerating the real estate investing educational system, because I know it inside and out. I personally know many of the so-called “gurus.” I’ve been close to it for 25 years. My opinion is that the fees charged are exorbitant because the promoters have found deep pockets in the marketplace.

When I started my real estate investing career 25 years ago, real estate investing TV infomercials were unknown and real estate investing seminars were extremely rare. Back then, Mark Haroldsen followed an emerging trend started by Al Lowry and Nick Nickerson by holding occasional real estate investing seminars across the country. Later Robert Allen expanded the industry. Robert Allen promoted real estate investing conventions in the major cities across the U.S. He found a market for costly real estate investing packages of information with cassette tapes and note books. TV infomercials, expensive seminars, and outlandish coaching fees followed in subsequent years. Would-be real estate investing aspirants today who want more than an inadequate salary from a job in Dullsville often conclude that they have to “pay through the nose” for real estate investing know-how.

However, through diligent searching, these want to-bees often find that this education in real estate investing is more readily obtained from other sources than they previously imagined.

Real estate investing is probably one of the most easily learned skills never taught in school. Real estate investing is probably one of the most prolific careers available on Planet Earth. Because families now live in houses instead of caves, houses available for fix up are everywhere. And probably nothing contributes to upgrading the deplorable housing conditions across America comparable to real estate investing in fix up properties.

The entrepreneur-minded aspirant who discovers the real estate investing industry often catches a vision of life-beyond-a-job. Books and online courses offer an alternative to expensive seminars and coaching.

Real Estate Investing – FSBOs vs. Agent Listings?

Many would-be real estate investing professionals face discouragement because of the assumption that acquisitions require deep-pockets. Some even believe the myth that nothing-down purchases are impossible.

The early 1980s era in real estate investing known as the Zero Down Real Estate Movement was initiated by Robert Allen with his best-seller, “Nothing Down.” After observing how commercial properties were acquired with no money down, Allen applied 50 techniques from the commercial real estate industry to the residential property marketplace. He was reportedly paid $1 million advance royalties for his publication, and began holding real estate investing conventions across the country.

The Nothing Down era was a startling eye-opener to the public. Very few were aware of Allen’s predecessors, like Nick Nickerson, Al Lowry and Mark Haroldsen who wrote books on real estate investing requiring no money. Allen popularized the notion, and it was a strong public draw for his real estate investing seminars.

However, some of Allen’s convention speakers were ultimately revealed as “con men,” and some bellied up. Robert Allen himself went bankrupt in 1996. The public generally concluded that Allen was probably a fraud, and that real estate investing was impossible without deep-pockets.

The Wall St.Journal got wind of the Nothing Down Real Estate Investing Movement, and interviewed many investors who were using “Zero Money Down” techniques. The business editor of the Wall St.Journal interviewed me repeatedly (and others who knew of my real estate investing), and featured me in an editorial as one of the most successful investors in the nation who had purchased millions of dollars in rental property without any money.

These previous unfolding events are pertinent to the conclusion of how to buy real estate properties with limited funds.

I proved that properties could be acquired without cash (or credit) to the tune of $10 million in real estate investments during my first 4 years. I used a $10 bill in the acquisition of many of my properties.

Purchases from FSBOs (For Sale By Owners) were possible through negotiations with motivated sellers. I bought millions of dollars in real estate properties without cash or credit by learning acquisition skills that required no money down.

On the other hand, real estate properties listed by real estate agents minimally require a down payment that covers the agent’s listing fee. These listed properties were no more valuable than the FSBO properties, but the agent fees demanded cash upon acquisition. In the intervening years since the 1980s, I have purchased some agent-listed properties, but my target acquisition continues to be FSBO real estate property from a motivated seller.