Many investors I know are currently following the advice of Warren Buffett to be “fearful when others are greedy.” Buffett himself is presently sitting on the sidelines with $128 billion.
You may be thinking that he is a stock guy and does not own real estate. Actually, he owns quite a bit of it! While Buffett isn’t counting doors, he is smart enough to hold a substantial amount of hard assets.
Even if you don’t love the Buffett, there are a substantial number of factors that every investor should be considering in this real estate climate.
Properties currently seem to be selling like hot cakes for ridiculous prices. You may be making a ton of money right now if you are dialed into your niche and are a seasoned flipper.
But if you are just getting started or getting the feeling that every property you touch will turn to gold, you may want to read on and reconsider the facts.
This party, just as all parties, will end. No one knows precisely when or how long it will take, but there are some changes coming ahead.
Why You Shouldn’t Buy
1. You don’t grow wealth by following the herd.
Remember real estate rule number one: Buy low and sell high.
The buyers in this real estate market seem to be in a frenzy. The low interest rates seem too good to be true. People are buying larger homes to create a work-from-home space as a result of COVID-19. Plus, everyone knows cash is protected more in an asset than sitting in the bank earning .002%.
All of these are good incentives to buy. But the question remains, how much are you paying for your property?
Do you have reserves if you lose your job or business slows down?
Are you investing in a property that cashflows now but won’t if rents decrease when the market corrects by 10-20% in Q1 and Q2, as many predict?
Knowing that you are buying high at what many consider to be the market’s peak presents a risk. When following the crowd, the ones at the end of the line never win the prize.
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