Getting Back To The Fundamentals In Real Estate Investing
By Thomas Campenni
Every day when I read the paper or listen to news on TV or radio, I am bombarded with stories about how bad the housing market is. The experts repeat that the real estate market has crashed and burned. Loans in a variety of forms Cheap Money, Easy Money, No Money Down are to blame. But wait a minute, some say, it is real estate taxes that are the real problem. Too much inventory is another favorite rallying cry of the media.
Well, here is a little secret… there is no problem in the real estate market. The “market” is working just fine. The market is correcting itself because prices, the cost of credit and inventory have not been in balance. One of the reasons for this unbalance is the reporting that has been done in the news media. Just over a year ago, news outlets carried stories about the rising real estate market. People were buying properties not yet built and flipping those properties for huge profits. The media gurus shouted “buy at any price; it will be worth more tomorrow.” What the average investor forgot were the fundamentals of investing. Every time an individual invests in anything, but especially real estate, he/she must remember that there are economic principles that must be adhered to by the investor. People who buy real estate with the intent of making a quick dollar are not investing, they are gambling. The value of real estate is determined by paying today for the present worth of future benefits.
An investor must assume that the price or cost of a property is what the property is worth at the time the contract to buy it is signed. Any added value past that date of agreement historically has developed over time. Consequently, the investor buys a property for “$x” and believes that “$x” will increase to “$y” during the time period of his/her ownership. The factors influencing the increase in value include inflation, government policy, supply and demand, etc. The investor believes that this particular vehicle is the best use of his/her investment funds because it will return the highest amount over the time the funds remain in the investment.
When those fundamentals are forgotten is when the investor will not be a successful investor. Real estate is a sound choice for increasing your wealth. Whether one invests in real estate, the stock market or a CD, it is always with the intention that you are paying in today’s dollars for a return in the future. So, when the pundits begin hyping another “golden opportunity,” look at the fundamentals on investing before taking their word.
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Thomas F. Campenni CPM, CCIM has more than 35 years of experience as a broker and is licensed in Florida, New York, New Jersey and Connecticut. Since 1992, Tom’s focus has been working with a smaller client base so that he can provide the kind of individualized service that results in greater return for his clients and, consequently, greater client satisfaction. In addition to his real estate brokers’ licenses, Tom also holds insurance licenses in New York and Florida and has earned the CCIM (Certified Commercial Investment Member) and CPM (Certified Property Manager) designations. Please visit http://www.thomascampenni.com or email him at Tom@thomascampenni.com for additional information. |
