Real Estate is a Dead-End Personal Investment
- Author: Kelly Cooke
- Posted: 2024-09-02
Once upon a time, way back in the Golden Age of American real estate, which was back in 2019, thousands upon thousands of ordinary people were investing in the real estate market for their future retirement. This doesn't necessarily mean they were flipping houses for profit like you see on those television shows (most of which are 100% fake). More like, these were normal people who were investing in small townhouses and apartment buildings, supplementing their income to the tune of a few thousand a month, and investing that money via a more diverse portfolio. The ultimate goal, of course, was to eventually sell those properties off in many years for a big profit; that one huge last payday before sailing off into the sunset of retirement. Though with COVID and Joe Biden and an open-door policy for every billion-dollar corporation on the planet, most experts agree that real estate is officially a dead-end personal investment. Whoever killed it did so in a big way, and it will likely take over a decade to recover.
In the United States of America right now, the housing market is experiencing an all-time high on prices, which are all artificially inflated through a really barren market. In other words, the worst housing shortage in America in over 70 years is driving prices up, mostly through bidding wars and/or the fact that multinational corporations are buying up every property they can. So, for personal investors, they have been priced right out of the market. You may have your eyes on some property that's not really that expensive yet, and you're thinking that some supplemental income, or even a huge sell-off, could really be helpful to your portfolio. Before you leap at something like that, however, take the time to consider that these high prices are not a boom; they're a bubble. When that bubble bursts, the market's bottom will fall out, and your investment may be worth about as much as an abandoned home in Detroit.
The experts predict a minimum of a 20% crash in 2023. Is that really bad for you, if you plan to hold on tightly to your real estate for a lot longer? Maybe so, maybe no; the point here is that it's a huge gamble, especially if you're just holding onto it until which point you sell it off for a profit. So much could happen in that time. It's just not a wise investment anymore.
If you recall the housing market crash of 2008, mortgage lenders couldn't hold onto those homes to eventually see a profit. It never rebounded for them. Those homes were considered a loss, selling for pennies on the dollar, and so the government had to bail these big businesses out. Remember "too big to fail"? That included a whole lot of mortgage lenders who were eating those losses specifically because their homes were worthless, at least relative to how much they had invested in them.
Never Say Never, But Not Right Now
Even if the housing market bottoms out at over 20% next year, it's eventually going to rebound. There are nearly 350 million people in America, and everyone needs shelter. Houses are going to be built, houses are going to sell, and people are going to buy them. That's just the way of the world. However, that in no way means that your investment would pay off. For instance, say that you put up about $350,000 for a split townhouse. You think it's a great initial investment, even in the short-term, because you can charge two different rents for around $1,200 each. That's $2,400 a month, nearly $30,000 a year. Now imagine the market crashes and you can only charge half that amount of rent. Now you're looking to sell off, but the property is only appraising for around $175,000. Even combined with the rent, it would take you many years just to break even. If all you're investing for is to break even, a savings account is a much better choice.
You're investing because you want to profit off of your investment. For the foreseeable future, investing in real estate is a really bad choice. The only people investing in real estate right now are corporations that control many billions of dollars, and they can afford to wait a very long time before selling. You are probably not in that position, or else you wouldn't have to invest. So, set your sights on a different type of investment.
