People often ask us how to get started in real estate investing.
We both started in our early 20’s and had the same mentor; our two Brokers and Founders of Terrace. What they strongly advocated was the principle of buying sound investment properties to keep and hold and to re-mortgage the property’s increased value – then re-invest and, in the course of time, accumulate an increasing number of appreciating assets for future security.
The basic concepts of good real estate investments are open to all people with reasonable assets, with minimum risk of loss; even if your only asset is your personal residence.
An investment strategy that is conservative and sound has little chance of failure. For a loss to take place, it would be have to be an extraordinary market situation. If the whole investment market fell, then the whole economy of the country would be in jeopardy. But if you have some capital set aside for such an event, you can “hold on” until the market recovers.
The fact that it is possible for people to loose sums of their investment capital is a disturbing thought. Investments are meant to profit people and enrich their lives not to cause distress and hardship. We do not object to real estate speculation or gambling if, indeed, that is what people intend to do. Some have been very successful buying, remodeling, and “flipping” real estate, especially on the Peninsula. But when they call it investing, this is a cause for concern. A genuine investment occurs only when it provides a means of materially increasing one’s wealth without reasonable risk of loss. It is certain that there will be short term setbacks in market conditions, but you must plan and be able to sustain these times and be looking at the long term and the big picture.
Most big investors are familiar with this concept. For example, after a tremendously appreciating real estate market of the mid 1980’s in New York City, the market had a huge set back in the late 1980’s and early 1990’s. Then again, the 2007 real estate downturn occurred. The big investors “battened down their hatches” and if necessary, worked out new arrangements with their lenders and “weathered the storm”. Slowly the market came back to where it was and now has surpassed what anyone thought was possible. The dollar amount of properties in downtown New York, as well as everywhere else, in the 1980’s seems very low compared to present day prices.
With high taxation of income and inflation eating away the real value of capital, I believe real estate is not only the safest and surest way to become wealthy, but in our opinion, the only way.
This article was written for the San Francisco Examiner.
Eric Ruxton and Larry Aikins are the owners of Terrace Realty Inc. and Terrace Associates Inc., in Redwood City. Terrace has been in business for over 50 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.