Why rising real estate prices are not on everyone’s wish list
I read a lot of real estate related material – articles, blogs, research and reports – and all seem to have this underlying assumption that I have a hard time with. Most cheer when prices of real estate go up and seem to want to jump off the nearest precipice when they drop. I don’t understand this, especially from professionals in the industry.
Sure, there are people who want the value of their home to rise so that they can sell it, pay off the mortgage and maybe have a little to spare. But most people who own real estate are not in that position – especially real estate agents, brokers and other industry professionals and investors.
Real estate industry professionals – you’re first
If you make a living selling or leasing real estate, you’d have to be nuts to want prices to rise. If you look at increased prices and you see dollar signs because of higher commissions, then you need to get better at your job.
Lower prices mean that buyers are out there and will sign on the dotted line to secure a property. The problem is that you need to get better at your job – get listings in an environment where prices are generally lower. Sure, low inventory is an issue, but get creative. If you sit in your office and await a property owner to walk through the door to sign you up as a listing agent you’re dreaming. Same applies to waiting for the phone to ring.
Get out there and talk to people – honestly. Don’t promise the world, be an honest real estate professional and you’ll be surprised at the reputation you get around the place. It’s a good thing. If the going is tough, get creative – that doesn’t mean get gimmicky either, get real.
Real estate investors – you’re next
So you’re a real estate investor, that’s great – but if you are and you rely on prices to go up to make money you’re in the wrong game. Seriously. If your business and income is reliant on asset appreciation, you’re in trouble. You’re essentially gambling, because capital gains are not something that you can control.
So your real estate investment business plan has to include some cash flow properties so earn that all important income. Honestly, if you have structure your property well enough, then property values should almost be irrelevant.
So please forget the fascination with real estate values – they are largely a subjective figment of the valuer’s imagination anyway. Concentrate on making your business independent from fickle market fluctuations.