On October 16th Warren Buffett wrote an op/ed for the New York Times talking about the fact that he is going "all-in" on the U.S. stock market.
He admits that he doesn't know if the market will be up or down next month, or even next year, but he is still making his investment today.
Buffett contends that, "But most major companies will be setting new profit records 5, 10 and 20 years from now."
He says a simple rule dictates his investment philosophy, "Be fearful when others are greedy, and be greedy when others are fearful."
He mentions that negative headlines are an investors best friend.
I believe Warren Buffet's philosophy applies to real estate investing as well.
Nobody knows for certain if a piece of property is going to be worth more or less next year. But it doesn't mean that you don't make the investment now.
Most properties will certainly be worth more in 5, 10, and 20 years than they are now. Rents will also be more expensive resulting in more positive cash flow from your investments and better returns.
If you don't believe me go ask your parents what they bought their first home for. Or think about what you bought your first home for 5, 10, or 20 years ago. Or what you used to pay for rent a couple of decades ago.
The investments you make today are not for today, they are for the future. Twenty years from now, as you look back, do you think you will be disapointed that you invested in a piece of real estate at or near the bottom of the market today?
You may or may not be familiar with CNBC's Diana Olick. She is one of their senior housing correspondents and she also has a blog.
She made a good point today, which I agree with. The blog entry title is "Behind All The Problems, It's Still About Foreclosures."
Here is a specific quote from her most recent post, "Someday, someone is going to realize that behind all these credit woes and credit bailouts and emergency international liquidity bonanzas are still a whole lot of foreclosure signs, and they don't seem to be coming down any time soon."
What I diagree with Diana on is that she knows foreclosures are the problem but she also feels that the real estate market needs a natural correction. She thinks that housing is simply too expensive and she has stated her opinion in other blog posts. She is wrong. Homeowenrship rates are at 68%, one of the highest on record. Affordability is not the issue, at least not for most of America.
Here is the thing, you can't have success stemming foreclosures if you are not addressing the underlying systemic issue causing foreclosures which is that there is simply too many homes for sale and not enough demand for them. Some estimates will indicate that there are over 1 million too many homes for sale.
It is this supply/demand imbalance that is driving property values down. And until this supply/demand relationship becomes more balanced, we will continue to see foreclosures.
You can't just try to fix a broken levie when the city is under water. You need to pump the water out of the city too. And waiting for the water to evaporate is not an option - as we have seen.
Here is a link to my proposal: www.HousingStimulusPlan.org
If you are wondering why despite all of the measures that the Fed and the Treasury have taken to stimulate the economy and the housing market are not working it is because they are all monetary policies. And right now, the monetary system is broken.
The perfect example of this is what happened on Monday the 13th where the Treasury was finally put in a position where they needed to buy into equity positions into our banks. An unprecidented course of action.
None of the other monetary policies were working. Cutting the discount and the federal funds rate was not having the desired affect. Pumping billions into the banking system was not getting the results that they wanted to see. Ever wonder why mortgage rates, despite all of the efforts by the Fed over the past 14 months, have not declined significantly? And they have been following this policy for the better part of a year, since August of 2007 to be specific.
The economy, banking system, and most importantly the housing market needs a new fiscal policy to bring us off of the course we are currently on.
We need Washington to bring something new to the table to stimulate new demand for real estate and growth in our economy.
I outline my proposal here: www.HousingStimulusPlan.org
Interesting times.
Yesterday on CNBC Donald Trump said of the Government's plan to buy equity stakes in banks, "Feels like socialism, but I like it."
The latest intervention is what happens when the Government is slow to identify that there is indeed a problem, slow to react to the problem, and inadequate in their response to the problem.
While this capital injection provides banks with a life preserver, it also puts the tax payer on the hooks for keeping these banks afloat indefinitely. Yes, I know it is only three years, but the gov't is not going to walk away from their capital in three years and let these banks fail if they are in a position to fail.
Look at AIG. The gov't gave them a life line of $85 billion just a month ago. And then after this was almost exhausted, they asked the Fed for another $37.8 billion on October 9th. And of course the Fed obliged, they couldn't say no.
We are entering an interdependent time for our banks. Kind of like kids that graduate from college, but then move back in with their parents and begin to enjoy the life style of not having a support themselves. They got warm cooked meals everynight, have zero responsibility, and no incentive to get out of the house and start making money. This is what we are creating with these banks.
Now, here is the thing. Maybe this is the only and last resort to prevent a collapse of our banking system. Hopefully it will work, the alternative is not pretty.
But at some point, these banks need to start lending again and have some confidence in the market, independent of government intervention and guarantees.
The plan that I outline at www.HousingStimulusPlan.org would give banks an opportunity to start lending again and be able to support themselves.
"Real estate is going out of business!"
Have you seen this headline yet on CNN?
Me neither.
And we won't.
Consider this when deciding where to invest your money and trying to determine what is a safe investment:
No matter what happens, people are not going to be sleeping in the streets.
Real estate is not going out of business.
It is not going bankrupt.
It is not going to be bought out by Bank of America.
The more things change, the more they stay the same. Real estate has always been and will always be one of the safest investments you can make.
With all of the fear going on, how many people do you know that are deciding to sell their homes and opting for sleeping in the streets?
President of Mark MacKenzie Real Estate Planning, a real estate research and investment services brokerage; author of "It's The Housing Market, Stupid!"
He's been featured as an "Innovator" by the Phoenix Business Journal and a "life-time advisor" by REALTOR Magazine.
Mark MacKenzie has contributed to articles in the Wall Street Journal, the Arizona Republic, national REALTOR Magazine, and he has a regular feature in Personal Real Estate Investor Magazine which is available in Borders & Barnes & Noble bookstores throughout the country.
Mark MacKenzie Real Estate Planning is a real estate research and investment services brokerage. They track local supply and demand trends for over 75 markets throughout the country.
Mark has written and published three books, "It's The Housing Market, Stupid!", "Marketopoly", which debuted on Amazon.com as the #1 real estate and investment book, as well as "The New Gold Rush - Real Estate".
It's The Housing Market, Stupid! is the name of Mark's latest book and economic policy that would stimulate investment demand for real estate and subsequently provide a back-stop to declining home values, foreclosures, and economic conditions.
The fiscal stimulus has its origins in the Tax Reform Act of 1986 as well as the Gulf Opportunity Zone Act of 2005. The policy would allow for more Americans to be eligible to receive greater tax benefits when investing in real estate. The result would be an increase demand for real estate, the excess supply of homes would be absorbed, Americans would receive a tax cut, and banks would be provided with a good source of new loans and income.
"Clearly demonstrates the author's thorough understanding of how tax law and legislation impacts the housing market. Little changes can make a huge difference and that's the very valid premise of this book. I think everyone who has ever considered themselves a real estate investor, or thought about being one should read this very important book."
Diane Kennedy CPA, Bestselling Author - Loopholes of the Rich
"What we need is incentive in the form of new found confidence in free enterprise and capitalism, not another bailout. Mark MacKenzie expertly illustrates the way out of the real estate depression is through renewed interest in investing in the most stable commodity since the 1930's - real estate."
Real Estate "Artist" Frank McKinney
5-time bestselling author, including Burst This! Frank McKinney's Bubble-Proof Real Estate Strategies and The Tap
"Refreshingly grounded in the fundamentals of impacting demand in today's housing market."
John Foltz, President - Realty Executives
"If you're looking for a real estate professional, someone who uses proven techniques and hard work to help you achieve your goals, then Mark is your man. From locating the property, securing financing, closing escrow, setting up property management, and beyond, Mark was right there with us. We often felt as if we were his only clients! Honesty, integrity, and dedication aren't easily found these days, but that's what Mark is all about!"
-Greg & Patty Spears
"Before we started using Mark MacKenzie a few years ago we always thought of real estate agents as a necessary evil, but he has completely changed our mindset. Since then he has become one of our biggest assets in our financial planning. Now, whenever we hear that any of our friends and family are making any sort of real estate decision we give Mark our highest recommendation. Each time we've been thanked and now Mark is one of their biggest assets too. He's not only been beneficial in our home buying but every stage in between. We feel tremendously blessed to have found someone like him at this early stage in our lives. His integrity, work ethic and friendship is something that we know we will enjoy in the many years to come."
-Clint & Kim Rowley
"I would like to express my sincere gratitude, respect and admiration I have for Mark, and his innate ability to assimilate and support my investment initiatives, on both a professional level and a personal level. Mark MacKenzie Real Estate Planning has provided me the means, I feel, to move forward with a plan to personal wealth and eventual financial security.
After contacting Mark initially, he understood my business /real estate plans, with the immediate focus to be on rental properties with positive monthly cash flow. This has been accomplished within the first few months, with an initial purchase of a rental, duplex home in Mustang, Oklahoma.
Mark worked diligently for months with the Sellers, Lender, and Property Management organizations to close the deal, as the properties were still under construction. The purchase of the property was contingent upon the properties being rented upon completion of construction. This provided the immediate cash flow, and not the typical initial vacancy with myself to carry the credit float.
I would like to add that Mark is always available via phone to answer questions or provide his Real Estate expertise. He was patient as he mentored me on many Real Estate disciplines. Where else can you find expert advice at no charge. I look forward to many successful, future real estate transactions with Mark MacKenzie Real Estate Planning."
-Timothy D. McManus
"We are very impressed with Mark's real estate knowledge in forecasting what markets he thinks are going to be a good investment. Over the past three years we have developed a great working relationship and have purchased three investment properties with Mark's tremendous help. His devotion in finding us exactly the right properties and giving us all the information we needed helped make our decisions and the buying process very comfortable and smooth. We appreciate his attention to detail and tireless work ethic and look forward to working with him on all our future real estate endeavors."
-Kurt & Kathy Dodge
"Mark's knowledge of Real Estate investing starategies has been a tremendous help to my wife and I. We are following the 10 year plan outlined in his book and are on our way to financial independance!"
-Jason & Danielle Bliss
"We recommend working with Mark to any buyer or seller. Whether you are a 1st time buyer, or a seasoned investor, Mark is an excellent listener, very knowledgeable about real estate, and will always put your needs first. We worked with Mark in purchasing an investment property in New Mexico, and plan on doing so again. Further, Mark will also help evaluate and advise you on how to achieve not only your short term, but long term real estate goals as well."
-Bryan & Kimberly Lynch
"We have known Mark now for several years. We have worked with him in the purchase of rental properties and continue to do so.
We have found his honesty and expertise to be unsurpassed. He has been of the utmost help to us and others we know. He is an extremely professional individual and takes excellent care of his clients. Mark is always easy to contact, immediately returns phone calls and provides superb real estate market information. We plan to continue to do business with him as we have great respect for his knowledge of the market.
One of the things that we truly appreciate about Mark is the way he looks at all of the real estate market information before we even start searching for a property. Once we have that information it is much easier to choose an area to invest in and feel confident about the purchase that we are making. We can later follow up on our investments by using Mark's web site to access current market information on each property we have purchased. The web site, with use of our password, shows pictures of our properties with a link to the property values which Mark updates quarterly. Mark is licensed in Arizona as well as other states which allows us the opportunity to invest in multiple markets.
We consider Mark to be more than just someone with whom we do business with. We now consider him a friend as well."
-Tim & Andrea Rattenbury
"My wife and I had talked about investing in real estate for a long time (years) but we just didn't know how to get started. We bought our first home in 1990 and it seemed like a nightmare. The ever changing figures, too many meetings and back and forth negotiating.
A couple of years ago we heard about Mark MacKenzie from a mutual friend. We contacted Mark and within 30 days we had purchased our first invesmtent property. Mark makes it easy and stress free that I can't wait to do it again.
Mark went so far as to walk the property for us and even set up a property manager. We gained more than an agent, we gained a friend.
Mark gained our trust, friendship, and lifelong investments. I still can't believe how easy and worry free Mark made our investment and the lengths he graciously went to just insure we were comfortable. We look forward to our next investment."
-Jay & Jeannette Giles
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