My husband and I recently transferred to California for his job. I lived in the Sunshine State for many years so housing prices seemed normal to me, but he has never lived in California so he had to get over the sticker shock and the worry of “if we’re buying at an all-time high, what if it goes down?”
I am not downplaying his concerns; I know how cyclical the housing and economic markets are. But I also know that buying a home can be financially better than renting (and if you need proof, Investors.com has it). And while we were shopping for personal property, I will admit upfront that I am real estate investor. But I treat my real estate holdings much like I do stocks: I buy both as long-term investments and buy ones that generate income while I hold them. This worked well for me in the downturn of 2000 and during and after the crash in 2008.
Experts have predicted another bubble burst though they disagree about when. Wolf Richter wrote in Business Insider in June that the United States is certainly in a housing bubble (and prices have only gone up in most areas in the last quarter) though he says predicting when the market will begin to deflate is difficult. Teo Nicolais at Harvard predicts the current cycle to peak around 2024, barring a major war or other cataclysmic event. If he’s correct, that’s another six plus years to invest and make a profit.
U.S. Army Captain Lee Escobar, author of Rich Soldier: Mission Financial Freedom, and a real estate investor who has purchased over 100 properties and has participated in some fashion in the purchase of hundreds of more properties, says that knowing when to buy, hold and sell is mostly about education and if it’s your personal property versus an investment. “The proper financial education combined with proven systems creates a recession-proof real estate investing model. Whether the market is going up, down or sideways, smart investors always prosper,” Escobar says.
Financial website The Balance explains four basic ways to make money from real estate: appreciation of the real estate holding, cash flow income (from rent, storage units, car washes, etc.), real estate related income (acting as a broker, for example) and ancillary real estate investment income (such as vending machines or laundry facilities in an apartment building). Making steady money in real estate—regardless of what part of the cycle the housing market and economy is in—involves a combination of at least two of the above ways.
And while we were buying a house for our personal use this time, we also considered if what we were buying would make a good rental unit and how the area was appreciating—looking at it with real estate investment mindset.
Successful real estate investors treat their investments as a business, says Escobar, not as a hobby. “While the market is up, intelligent investors also prepare for the inevitable downturn. While it’s down, we can also prepare for it to inevitably go up.” He credits his own success with having the right education, plus “having the right mentors and coaches for accountability and support.”
Education to understand buying real estate can take many forms. Twenty-one years ago, I took a home-buying class through the University of Washington extension program before I started to look for my first property. In today's time there are so many ways to learn real estate investing, but there is nothing like hands on training, someone to answer questions and having your handheld every step of the way. Enrolling in a workshop and learning from a mentor, like Lee Escobar, can make that happen.