With anything that has a big upside, there is usually the fear of the downside, but I say:
No pain, no gain!
Think back (or forward) to your first real-estate acquisition – it probably was (will be) your own home.
Fear? Sure … in a ‘down market’ there are perhaps well-founded fears that prices could go even lower.
Does this mean that you shouldn’t buy a house? That’s up to you.
But, here’s what I think:
First, you should always seek out and listen to expert advice … that is advice that comes from:
(a) Somebody who understands the game – that would be a Realtor, and
(b) Somebody who has made a lot of money in real-estate – that would be me 😉
Follow what your Realtor says, but don’t be paralysed with fear …
If you find THE house that you like AND you can afford the payments, go ahead and BUY.
Just be sure to lock in a loooong (say, 35 year) mortgage at current rates (still a very low 6%).
Time – and low current interest rates (which is why you MUST lock in for as long as you can) – will ‘cure’ any mistakes that you do make … after all, mistakes can happen despite following all of the good advice that others will give you.
But, real-estate is (perhaps, surprisingly, to new investors) very forgiving if you have a long-term view …
And, I am a firm believer that owning your own home is the START of your path to wealth.
Even so, it’s OK to feel at least a little FEAR and TREPIDATION when you submit that offer …
… so that you will feel at least a little better, let me tell you about the real-estate transaction that scared me the most:
About 5 years ago, I decided to move offices. Even though I had already made some smaller real-estate investments, I had always rented my office space.
My accountant suggested that for this move, I should BUY my own office building!
Now, my business was just beginning to make (still very, very little) money after years and years of losses, so you can understand my first words to my accountant: “Say what, Fool?” 😉
On top of that, the building that we had targeted was selling at auction … and, there were a ton of people at the on-site auction, all looking very intimidating and all looking like they wanted to – and, could afford to – buy … holy sh*t … scary stuff!
Now, I don’t recommend that anybody (bar an expert) buy at auction – just too many unknowns to deal with – but, I somehow ended up with this piece of real-estate for more than $1.25 million …
… and, it still needed another $500,000 in renovations and office fit-out before I could use it!
We bought the building with 25% down and we leased all of the renovations and fit-out.
I sweated every payment for the next couple of years, until the cash-flow in the business caught up with (and, thankfully, eventually overtook) the mortgage and lease payments.
Just a few short years later, I sold that business, then the building … I made a cool million dollars on the sale of the building alone; that’s $1 million that I would NOT have had if I hadn’t made the leap to buy it.
In parallel, I kept building my real-estate portfolio, using the ‘spare cash’ that my other businesses produced … most of which I still own (the real-estate, not the businesses … I usually don’t advocate buy-to-sell for real-estate … the office building was an exception).
But, that office building was still my scariest – yet, one of my best – Real Estate transactions, to date.
So, if you are thinking of buying some real-estate (be it your own home, own office, or a rental) and can afford the payments, I say:
Go ahead and jump right in … after the inital shock, the water’s fine 🙂