Now that I'm nearly 40 I've had the opportunity to not only experience the real estate boom and bust but also the internet bust. Before I got into real estate I was a marketing specialist and experienced some pretty awesome highs as many of my internet clients set sail and quickly accelerated to warp speed. There was plenty of venture capital to be had as everyone with any liquidity wanted to pan for gold in the internet river. I personally was offered stocks in several internet companies in lieu of my billing rate. It all sounded like a slam dunk millionaire story as all I would have to do is wait for the companies to go public. I was keenly aware that many of my friends had placed their bets and some had even started collecting their winnings. It was obvious that my clients were riding the gravy train of VC money just spending like drunk sailors on a weekend leave. I was more than happy to take some of that money.
You know what happened from there. Millions if not billions were lost in the internet game and I had lined my pockets with cash instead of stock options. I recall one client in particular who started five different internet companies and had actually sold one of those for several million dollars. Soon after the dramatic downturn I heard less and less from him and eventually lost all touch within a year. Fast forward five years and I pick up a small local business publication containing articles on local business people. There he was being featured in an article about reinventing himself after loosing everything. I wish him good luck and certainly wish him success.
Before you think I'm just a rambling blogger here, the point I'm making is that you have to know how to play, walk away and survive. I shutter to think if I had traded all those billable hours for stock options that are now worthless slips of paper. There was writing on the wall and I wasn't in denial of what was happening with my internet clients. Even though I opted for the cash my business took a huge shot in the bottom line because my business was so internet focused. I survived by transforming my focus into other industries and just in the nick of time I might add. That said, I still own a few web sites and continue to enjoy the profits of those sites. That was a survival strategy in holding on to what I considered some assets that would have future value. These web sites were not built on venture capital and I built them with my own sweat, blood and money. The most important points are that I worked with cash not credit and my goals were based on future gains not immediate returns.
It's interesting when you think of the internet as paralleling real estate and maybe that's the way the inventors of the internet viewed it as they issued the first domain name. Al Gore didn't invent the internet by the way but I do believe he thinks he's Mother Earth. Anyway, by looking long term and not getting caught up in the get rich quick hype I'm now enjoying some on-going steady revenue from my domains and my marketing consultancy work survived.
Just like the internet, real estate is now suffering the same corrective cycle at this time. If you didn't get caught up in the hype and still have liquidity, you're in a commanding position to prepare for the next upswing in real estate. Just has the internet has corrected and survived so will real estate. The difference here is that the internet has only experienced one corrective cycle in it's short existence. Many a battles for internet real estate are still to be waged I can guarantee you that. Real estate (land) on the other hand is as old as human beings themselves. From the moment Adam and Eve were served their eviction notice the quest for land began. Since then, battles have been waged, lives lost and dollars beyond count have been made and lost in real estate.
As John D. Rockefeller said, "The way to make money is to buy when blood is running in the streets." As it relates to real estate I think we'll have to roll our pant legs up a bit farther before this is all over with. If you're a seller you not only have the real estate bust to deal with but also the media created perception that this is a terrible time to buy.
I've never understood why media hype can always outweigh common sense and good reporting. If I were writing an article about real estate I would be gaining fans by reporting the great opportunities that currently exist in the real estate market for buyers with liquidity and good credit. Let's examine a scenario of waiting versus buying now. This is an example of a residential purchasing but the same math could be applied to land as well.
You put down 20% and obtain a 30yr fixed on $218.900 at 5.5%. Your payment is $934. Now let's imagine that a year from now the same house has dropped 10% in value or $197,010. By this time the recession or perceived recession has begun to improve. The Fed's reaction to stem off inflation is to raise rates. Now, your rate is 6% and your payment is still $934. The summation is that you would have saved nothing by waiting those 12 months to commit.
The caveat in this scenario is for those of you who have a home to sell before buying new or moving. The inventory of new homes and resells in most areas is monumental. Also consider the number of foreclosures that are coming on the market daily. You know all this already though as you've had it pounded in your head by the media.
In conclusion, if you're in the position credit-wise, cash-wise or otherwise now is the time to buy real estate (or stocks for that matter). I know I'm going about my regular investment schedule and in some cases buying stocks at a 75% discount from only a year ago. I plan to do the same with real estate as I hope to buy a sizable tract of land and/or a vacation rental property. All of those great plans hinge on my next real estate commission. So, buy real estate and let me be your real estate agent. I couldn't resist!
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