Real Estate: The Old Fashioned Way
LAST UPDATED: 10 January 2009

JANUARY 2009 - Is real estate still a good investment? Well, I guess that depends on what type of investor you are. Historically, real estate has always been considered a long-term investment, and it has a long history of being a stable and secure investment. It has, however, gone down in favor due to the type of investor it has recently attracted.

Looking back to 1926, the stock market and real estate market have been effectively “tied” with an average annualized return on investment (ROI) of about 10% each. Who wouldn’t take that investment right now? One reason so much money was pumped into the real estate market recently is the Dot.com Bubble in 2000 and 2001. The “day traders” turned around and became “flippers” of property. This increase in demand caused frenzy, and the next thing you knew, the man shining your shoes was giving real estate tips instead of stock tips.

So if you purchased property during the bubble expansion, and you need to sell that same property now, you are facing a potential loss. Most of these people are willing to hold on and wait until the market turns around. But how long do they need to wait? The problem is two-fold. First of all, a small percentage of those people really do need to sell to get some cash, and they are willing to take a loss to get out. Then you have the long term holders of similar properties who are planning to sell at today’s current market value prices because they are ready to do something else. These sellers are going to make a profit anyway because their cost basis is much lower. So, after these properties are closed, the market values will have changed. This adjustment, unfortunately, is a necessity to start the next cycle.

So, what type of investor are you? If you are looking to buy a piece a property, use it or rent it out, and hold onto it for five years or more, you will not find a better time to purchase. The “paper appreciation” from 2004 to 2008 has eroded away, and there are properties for sale with prices we last saw before 2004. If you are trying to “time the bottom” perfectly, you will miss it. Most people will not recognize this until the prices start to go back up. But then again, the media did not acknowledge we were in a recession until 12 months had gone by.

Our biggest hurdle in real estate is the sense of fear. Most people do not trust the stock market or the real estate market with such volatility. One thing is for sure, however. An investment in real estate deals with a finite space. On Sanibel & Captiva Islands, we are closing in on 100% build out. I think we all agree, that there are very few places like our islands, and when the next cycle begins, we will be the first to experience the upswing in prices. In times of uncertainty, stability is usually found by going back to our old-fashioned ways. Our faith, our families, our country and our businesses will all prosper if we all step back and realize what is truly important in life. For many, family memories formed on Sanibel & Captiva are important factors of life. That is why these islands are the best place to live, vacation, and own property. So if you are ready to invest the old-fashioned way, the time has come to buy your piece of paradise.

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