The real estate market is hot. Some are talking about bubbles and crashes. Is it too late to invest in real estate?
I sat with Craig O’Rourke in his office in Redondo Beach, California, to discuss this. Craig is a long-time investor and author of the top-rated book Destination Perpetuity: The Real Estate Investor's Road Map to Financial Freedom.
“Speculators, stay out!” O’Rourke says to those looking to make a quick buck. For these people, it might be too late. “The market is due for a correction. When exactly? We don’t know,” O’Rourke says. But for him and those who share his investment philosophy, it doesn’t matter. It’s never too late to invest.
O’Rourke’s philosophy reminds me of Warren Buffett’s buy-and-hold strategy. O’Rourke is about investing in rental properties for the long haul. The idea is buy, hold, let your tenants pay your mortgage, and allow rents and equity to go up. The goal is to turn your investment into a self-sustaining, money-making machine that feeds you rental income in perpetuity, month after month. A key ingredient is time.
“Time is a real estate investor’s best friend,” O’Rourke says. Time opens the faucet on the multiple revenue streams of real estate. One stream is property appreciation. “In the last century, in coastal Southern California, you can’t find a ten-year period where real estate didn’t return at least 6%, at the minimum,” O’Rourke says.
Then there is the rental appreciation stream. “When was the last time you heard rents were going down? It doesn’t happen, not here. Your payments stay the same; meanwhile, rents go up every year.”
The record-low interest rates, O’Rourke notes, are a huge incentive for investing now. “When you buy income property, what you’re buying is a payment,” he says. Interest rates matter. Property values go up and down, but an interest rate can last thirty years.
But investing in real estate is not for everyone. O’Rourke recommends buying with enough of a down payment to allow the property to sustain itself, independent of the market.
In short: speculators, stay out! All others—buy, hold, and remember, the goal is perpetual rental income.
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About the author: Daniel Rangel is a real estate agent, specializing in residential and residential income properties. He'd love to help you.
Learn more about Craig’s investment philosophy:
Get a copy of his book here. I’ve read it and highly recommend it.
Click here for his Google Talk.
