My Biggest Real Estate Mistake

Over the years I've made many investing mistakes, although real estate has been one bright spot. Of the many mistakes I've made along the way in real estate, the biggest one - by far - was removing myself from the markets.

Yes, there was a moment in time when I did not own a property. And even then, when inflation was barely mentioned and low, the slow erosion of the value of money never stopped. It's like a melting glacier....sloooooooow. But steady. I learned this lesson from the wife of one of the world's greatest real estate investors and executives. She told me the story of how they had been renting an expensive apartment while looking to buy. After months of searching, the markets experienced a bit of a shock and her husband decided they should put their search on hold to buy in at 'a better time'. They waited, while their kids continued to grow, and then when the markets 'returned' they stepped back in to resume their search with me. What they discovered - and learned - was rather painful. A lesson I have learned too, personally.

Being rather wealthy, they were seeking a prize property. During the market 'wobble' the best properties had been removed from the market. Those owners who too had taken months/years to find and secure them - often in multiple bids during strong markets - were not going to give them up easily, certainly not at big discounts. They too were wealthy enough to hold on. A year later we stepped back into the markets and eventually found them an incredible property at a relatively discounted price.....till you factored in the renovation costs that were now about 10% higher (not to mention furnishings that cost 10% more) after 2 years of 'low inflation' and renewed demand. Add this to the time they needed to own and renovate - and pay for rent to live while that was happening (Their rent had also gone up in the 3 years they waited for their new home) - and they ended up spending quite a bit more than had they bought 2-3 years before..... and they lost out on 3+ years of enjoyment too, not to mention the tax deduction.....

Exiting markets to wait for better markets is somewhat akin to gambling. If you don't get the timing 100% correct, you risk losing out on the natural forces of markets and time. These days if I ever sell a property I am certain to REPLACE it......FAST!?The costs of renting (with rising rents) often pale in comparison to the multiple advantages of ownership. Cash sitting in a bank right now is losing at least 5% of its value every year, if not more.....