I just read an article imploring folks to stay away from USA property right now.
I found the article very interesting.
Not sure I agree with the assessment, but very well written and very compelling.
Now my question is this, “If this is not a good time to buy property in the USA, then when is a good time?”
Which leads to another question, “Has there ever been a good time to buy property in the USA?”
I would hazard a guess – go out on a limb – and answer, “Yes.”
“When?” You say.
Glad you asked.
Well, my standard answer is this … whenever you find a deal that stacks up and you have the resources to pull it off.
But, let me share something a little more specific. A particular moment on the property timeline …
Denver, Colorado, circa 1990 …
I remember back to 1990. I was living in Denver, Colorado. The housing market was in a shambles. People were scared. People were losing their jobs. Times were tough.
We heard stories of people packing up the car, loading up the family and driving off to Kansas in the middle of the night. Nothing too unusual about that except … they didn’t tell the bank they were leaving; they didn’t tell the bank where they were going. They were essentially walking – or should I say running – away from their mortgage.
Consequently, the banks were left holding a lot of “dead” real estate. As such, the prices started to plummet.
And, you know what I heard people saying? Well, listen in to a typical conversation.
“I’ll never buy real estate again! I can’t sell my house … even for a loss. Nobody wants to buy it. What am I going to do?” Said my officemate.
“Why don’t you just live in it?” I asked with an innocent tone and secretly glad I didn’t own any property.
“Because I want to sell before my loss gets even worse! The price keeps going down and I want to minimize my loss!” He practically screamed at me. (He used a lot more colorful language than what I’ve shared with you.)
Does the word “panic” mean anything to you?
This conversation just about sums up the mood at the time. People were panicking.
Well, my office mate finally sold his place. For a fantastic loss. And he celebrated the sale as if he’d won the lottery. I remember thinking how rediculous this whole situation seemed. People were just happy to get out from under the bank mortgage. Who cares about the loss?
And, folks were not interesting in “sticking it out.” The mood was dismal. The economy was hurting and folks just assumed it would stay that way.
The situation had all the ingredients necessary for a good case of widespread panic. So, what did the masses do? That’s right … they panicked of course!
Did “panic” work?
Now, let’s look back at this “panic” time. Should people have panicked? Was the situation really that bad? Was the economy doomed forever?
You know the answer. I don’t have to tell you. You know what happened.
But, humor me and let me continue anyway … ok?
I know someone who took a $90,000 loss on the sale of residential property just to get out of it. Then 5 years later in 1995, the same house would have sold for about a $200,000 profit.
Do you think maybe they should have held onto the property?
I went back to Denver in 1995 on a business trip and saw houses selling for “the low $200s.” I was in shock. These prices seemed astronomically high to me. After all, these were the same homes that I could have bought back in 1990 for about $50 grand.
Do you think I should have bought property in Denver back in 1990?
How do you think I felt? Well, I’ll tell you.
I felt like an idiot!
Why did I listen to all the naysayers?
Why didn’t I do my own thinking?
Why didn’t I do my own research to determine a buy/no buy decision?
I was lazy. I went along with the herd. I went over the hill with all the other sheep.
I definately should have bought.
The situation in the USA today reminds me a lot of the situation back in 1990. As back then, people seem to be panicking. As back then, people just want to get out from under their mortgages. As back then, people are afraid to buy.
But, I’ve changed. I prefer to do my own thinking now. Not follow the herd, not listen to the naysayers and not go over the hill with the other sheep.
Same old objections …
Let’s review some classic objections to buying property in the USA today:
US economy is down.
So, what? Do you really think the US economy is going to stay down? Remember, the business of america is business! I reckon the economy will come back with a vengeance.
Do you want to wait for it to come back and then invest? Do you want to wait until prices come back and then you’re left with regret, “I could have got that same house for half the price 2 years ago.” I heard that a lot in the mid 90s in Denver. I was one of the people saying it!
Who’s going to rent the property?
I have properties in one of the highest unemployment areas in the US, central Florida. All my properties are happily rented and each returning over 10%. My highest rent is only $850 a month. Because the rents are so low, most everybody can afford it. So, the customer base for a nice 3 bedroom home at this price is quite huge.
These are the same objections folks used back in the early 90s. Consequently, most people sold at tremendous losses or just walked away from their mortgage.
But, some people bought …
A few people bought. Even thought just about everyone told them not to, they bought. And they bought. And now they’re probably very wealthy. They probably have extremely healthy, robust, positive cash flows.
I don’t want to repeat my mistake …
I didn’t buy any property in Denver back in 1990. And I’m very sorry I didn’t.
I don’t want to be sorry again. No thank you. I personally think this is a great time to be buying investment property in the USA.
But that’s just my opinion.