Avante Real Estate – East Bay Real Estate Blog

East Bay Blog

Now is the time for a solid investment

October 29th, 2008 10:20 AM

The sky is falling... or at least that is what it sounds like when you watch any of the 24 hour financial news channels lately. Real Estate has been hurting for a couple of years now, but the stock market just started getting hit extremely hard this year, particularly this month (October 2008). Although now might seem like one of the worst times to invest, it really is one of the best. If you talk to any stock broker, they will tell you that stocks are on sale right now and you should definitely be a buyer. You may have to stomach some up's and down's in the short term but in the long term you will be thankful you did. I believe the same can be said about real estate, except in my opinion it is an even better opportunity then stocks. Let me explain...

While the Dow Jones might be down about 30% from it's highs, real estate in some cities I'm seeing is down as much as 75% from it's highs. You could blame it on the bubble we had in real estate and say that homes were extremely over valued, and some were, however based on our current economic conditions I could argue that stocks were extremely over valued as well and based on the recent drops they were. So now we have two asset classes, both are hurting, why do I consider real estate a better investment at this time? Here are a couple of reasons:

Property you buy will never go down to zero. Even if the home you have on your land somehow becomes worthless you still have value in the land you own and no one can destroy that. Ask someone who owned Lehman Brothers stock what it is worth today and how much they paid...
Real Estate is still a highly leveraged asset. Yes, gone are the days of 100% financing, but you can still buy investment property with 20% down and a primary residence with 10%. If you try to buy stock on margin, you will have to put more of your own money into the game, or find a more liquid asset to use as collateral.
There are huge tax benefits to owning property. Not only can your write off the interest that you pay, but you can depreciate investment property as well.
Investment real estate can produce positive cash flow with little investment. Some stocks do offer dividends, but you have to investment a lot of money to get any type of significant cash flow. Also, not all stocks offer a dividend. In the current market I have investors getting positive cash flow immediately from rental property.
You control your property. Unlike with stocks, you are the CEO when it comes to your property. You do with it as you please. Ask all of those investors who owned Yahoo stock why they didn't sell to Microsoft for a nice profit...because they did not have control!

Of course I am biased toward real estate because that is the business I am in, but I really do think this is a great time to invest in property. I purchased a home in September that is producing positive cash flow immediately for me, and I am hoping to buy another in the next several months. If you are looking for a long term investment right now, look no further, now is the time to look at property again...

Posted by Ted & Lucy Ramos on October 29th, 2008 10:20 AMPost a Comment (0)