|
With the current turmoil in the stock market, and the slow real estate market, to the untrained observer this may seem like a good time to kick back and see what happens before making any serious investments. Savvy investors, however, know: When things seem to go sour, it’s the best time to invest — since investing is all about the long term.
“It’s a good time to invest (in real estate). Sellers are realistic, you can negotiate the price,” said Don Pennington, a Realtor with Windermere Real Estate/West Sound Inc. in Silverdale, who is also kown as “The Dean of Kitsap Real estate.” “Several months ago you ended up paying top dollar, now you can get concessions. It’s strictly a buyers’ market, and that’s a good time for investors to look for good deals.”
The real estate market has seen a dramatic change in the past few months to a year. Where homes were being snapped a year or two ago as soon as they came on the market — and often even before being listed — Realtors have many homes now that have been on the market for a while with no interest at all. Even well-priced homes may not have any showings, and the price escalations that were prevalent a while back are no longer happening.
While the economy has remained in good shape, the mortgage industry has been in upheaval around the country. Homebuyers who had adjustable rate mortgages from so-called subprime lenders saw their mortgage payments going up by several hundred dollars, and the excessive number of foreclosures sent a big number of those lenders into bankruptcy. Investors, in return, started bailing out.
“Investors hate uncertainty. There is a lot of uncertainty presently … It has caused a lot of investors to be very nervous and weary,” said Connie Rose, financial adviser with Edward Jones in Gig Harbor.
Rose said it’s more important to look at valuation than day to day ups and downs in order to determine if a certain stock is a smart buy. “No matter what the market is doing, there are good opportunities,” she said. “Historically, stocks have always been in place for people to make money over time. It’s time in the market, not timing of the market, that’s the key.”
Ed Stern, senior vice president of investments with UBS in Poulsbo, said there is one sure-proof strategy for getting a return on investment in the stock market regardless of the fluctuations: taking advantage of employer-sponsored retirement plans like 401k. He gives three reasons for using this strategy. First, when you sign up for the maximum pretax contribution you can afford and invest into basic, good mutual funds, you get immediate tax advantages; second, if the employer matches the contribution to a certain extent, you are guaranteed a 25 percent to 50 percent return right off the bat, regardless of the market; and third, you’re not investing all the money at once but over many pay periods, which helps average out the gains and losses.
“You make the money over the long haul,” he said. “This is one guaranteed way to win in a volatile market… I call it a win-win-win.”
One of the advantages of investing into stocks vs. real estate is liquidity. “If I decide to get my money out of the investment for some reason, I can do it on any day,” Rose said.
But deciding which kind of investment is best for you may not be easy. Pete Crane, financial adviser with Smith Barney in Silverdale, said, “It’s like having two children and you love them both equally. You shouldn’t put all eggs in one basket, and invest in many things.”
Fred Depee, a real estate agent with John L. Scott in Port Orchard, says potential real estate investors also need to look at their investments in the long term. The market goes in cycles, and if people look at only the last two to four years, they are likely to be concerned about losing money. Instead, they should look at five to 10 year patterns to understand the cycle.
“It’s an excellent time to invest,” said Depee. “The more shrewd (real estate) investors are even waiting for another six months to a year because they think they’ll be able to get even better deals.”
|
.jpg)
