OF ALL THE EMOTIONS, I BELIEVE FEAR most often keeps people from investing in real estate. First, let me say that you should not go out and buy a piece of real estate unless you have thought long and hard and know what you are getting into. However, if the deal makes sense, do not let fear stop you from doing it.
In uncertain times, as we presently have, it is easy to listen to negative news and buy into it, especially when it comes to real estate. What you should think about is all the people who are in your situation listening to the same news and letting fear determine if they should purchase real estate. Remember, newspapers are in the business of selling papers, and bad news sells better than good news. This is not to say that negative real estate news should be ignored, but rather investigated. Just because a paper says the real estate market is going to crash in the next six months in Los Angeles does not mean it is going to happen. With that said, investing in real estate is no small matter that should be taken lightly.
Smart real estate investors know that you make money in real estate when you buy. Put another way, the purchase price is one of the important factors that determines whether a real estate deal is a great, good, OK or bad deal. Like I have said in the past, a bad real estate deal can bankrupt you quickly, so do your due diligence before you pony up the earnest money and sign off on all the purchase contract contingencies. One successful investor once told me that you can always change the financing, but you can never change the purchase price. The purchase price is one of the most important variables when buying real estate, that is why so many buyers work on lowering the asking price.
In today’s Los Angeles real estate market the “you better buy it now before the next person walking through the door does” mentality has tempered. Buyers are finding more deals on the market for lower prices, but a great deal is still just that — a great deal. Statistically, condominiums are selling slower than single-family homes in today’s market, compared to a year ago. The reason comes down to the basic economic principle of supply and demand — at the end of the day, single-family homes are more desirable than condos and thus sell for more at a faster rate.
As I have stated in the past, if you are looking for a home because you need one, now is as good a time as any to buy one, just be prepared to come up with a 10 percent down payment. However, if you are speculating, meaning gambling on the real estate market to appreciate or go up in value, this is not the time to do so. If you are a true real estate investor, this may or may not be a good time to buy a piece of real estate because at the end of the day the deal needs to make sense.
If you come across a real estate deal, do your due diligence and come to the realization that the deal is worth doing, do not let fear get in your way. One of our greatest fears as a society is losing our basic biological needs. This is one reason why buying or losing a home are such a big deal. Remember 20 years from now the deal you do today can mean the difference between a comfortable life and a successful one.
Mike Heayn is a Washington Mutual multi-family loan consultant. He (310) 428- 1342, or e-mailed at
Originally published in the Santa Monica Daily Press print edition on April 30, 2008. Read the original PDF.