Is Real Estate Still a Good Investment?

By Al Thomas

Grandpa just died. He was only 67.

Another vacant house.

His brother has a house and his sister owns a house and their kids are paying for their own homes. Nothing wrong with that.

When Grandpa’s house is sold it is not going to cash out anywhere near what it would have brought in 2005. We all remember the high prices back then and we also remember the crash in 2008.

Prices seem to be rising, but it is very doubtful we will ever see 2005 prices again. The demographics say ‘no’.

Folks then were standing in line and paying over the asking price even though interest rates were much higher then they are now. Suddenly the bubble burst.

Most bubbles go down to where they started. Our generation has not seen that happen – YET. I hate to say this, but we are going there.

Why?

Because a house lasts forever (almost, think about that) and there are more houses and fewer number of family units being formed. Demand has come to a stagnation point. There is not an expanding population group like when grandpa started to work with a good job and increasing income. It takes both to drive up home prices.

Washington politicians believe they can push up house prices with free money called stimulus and low interest rates. Demographics are more potent than stimulus. Taxpayers (you) will pay the bill. Japan is an example. They have had many stimuli and the demographics are still driving both the real estate and stock market down.

It is estimated there will be 2,000,000 (million) vacant houses in the U.S. municipalities. Taxpayers (you) will pay to have them demolished unless Washington decides to give them to the illegals..

Is this a good time to buy a house? Only if you can buy a short sale or foreclosure at 40% or 50% off. You then flip it quickly or keep it for rental income. The investor must understand property management and real estate cash flow.

Don’t expect property to increase in value as it has in the past. It must pay for itself with positive cash flow.

There are many real estate “experts” who will teach you the “easy” way to make money doing this. Don’t believe any of them. They want thousands of your dollars. Check them carefully. Read their books. No money up front. But I learned. Guess how I know this.

Unless the investor is experienced at finding a reliable partner in a joint venture this may not be a good time to start real estate investing..

The market has been going up for 5 years and is over extended. Now is the time for extreme caution.

Al Thomas' newbook, "If It Doesn't Go Up, Don't Buy It!", 3rd edition, has helped thousands of people make money and keep their profits with his simple 2-step method. The method made 10% during 2008. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2014 Williamsburg Investment Co. All rights reserved.