Interview 15.4: Jeff Talks about the Real Estate Market

Jeff, My Market Is Stinky

Yesterday Jeff Brown, real estate investment advisor, showed us how the process works. Now he has to answer the question that I have.

Jeff, my town’s real estate market is terrible. Should I wait until it’s better?

IÃ¢â¬â¢ve been hearing that question for some time now from many parts of the country. LetÃ¢â¬â¢s step back and look at the big picture. You have more options than you may believe.

IÃ¢â¬â¢m based in San Diego where the real estate market is worse than some and better than others. But nobody would say itÃ¢â¬â¢s currently a good market. I have many investors from here who have invested not only out of town, but out of state. Some have acquired properties in two states. Why?

Since your capital doesnÃ¢â¬â¢t know where itÃ¢â¬â¢s invested, you can go anywhere you like. ThereÃ¢â¬â¢s literally no strong argument for staying local just to be local. ThereÃ¢â¬â¢s nothing magical in being able to drive by your property. It might give you the warm and fuzzies, but if your area is terrible, your choices are limited.

You can either invest somewhere else, or not invest while you wait for your townÃ¢â¬â¢s market to recover.

In San Diego, thatÃ¢â¬â¢s never going to happen. DonÃ¢â¬â¢t get me wrong — our market will regain its equilibrium. But in the next 5-10 years what investor in their right minds is going to pay $750,000 for a 40 year old duplex in a nice, but blue collar area of town? Not my clients, thatÃ¢â¬â¢s for sure.

So exactly what are your options?

First understand there are growth regions out there. DonÃ¢â¬â¢t believe everything you read, see, or hear in the media. Bad news sells newspapers, and air time.

You can readily access areas offering very well located affordable investment properties, just waiting for your capital. People just like you have come to my office from San Diego, and after hearing about the Phoenix area, ended up investing in 2-6 properties there. The same thing is now happening in pockets all over the country. Austin, Ogden, Salt Lake City, Boise, Denver, and I could go on.

Should you let your local depressed market delay your investment agenda? No way.

So what should you do? (You mean besides call a very knowledgeable real estate investment advisor Jeff?) J

Before you even think about making any offers anywhere you need to have your property management in hand. This sounds easy, but trust me, most of them arenÃ¢â¬â¢t worth the time it takes to pull out of their parking lot. If youÃ¢â¬â¢re investing in another region, property management will be your best friend Ã¢â¬â or your worst nightmare. Make your choice wisely.

And finally, whatÃ¢â¬â¢s the best part of investing in a far off city? You canÃ¢â¬â¢t drive by. You donÃ¢â¬â¢t get those 2 A.M. phone calls complaining about the stoveÃ¢â¬â¢s pilot light. YouÃ¢â¬â¢re not cleaning a newly vacated rental in preparation for a new tenant. Instead, you go to the movies or enjoy reading about how much your investments are appreciating in value. Investing out of town neednÃ¢â¬â¢t be difficult, but it does require you to be purposeful at every turn.

Should you wait until your town bounces back? You should if you can afford to tread the financial waters without hindering your retirement. Most people donÃ¢â¬â¢t have the luxury of wasting several years while their investment capital stagnates.

Make the move.

Jeff, you’ve made a difference in how I think about this subject.

Understanding and tracking investments can be a full-time job. It’s not something that will take care of itself. That’s why we have investment advisors to help us out. Find advisors you decide are intelligent and have integrity. Never feel like you’re being asked to take an off-the-rack plan. Have your planners justify why their choices are individually suited for you.

Even when your investment is small, your advisors should believe that you are with them because they are going to make your investment grow. So it’s to their benefit to pay attention to you. If they don’t have time, do what you do on the Internet, move on to one who knows how valuable you are.

–ME “Liz” Strauss

Jeff offers a free case study in the sidebar at his own blog BawldGuy Talking. Jeff also writes as a contributor at the Bloodhound Realty blog. Jeff will be attending SOBCon 07 in Chicago on May 11-12.