“Recently, I started warning you— ‘Beware when cranes are in the air.’ If New York real estate fails, it will affect the entire country. This is NOT the time to buy unless you steal.”— Grant Cardone
I love Miami, Florida. It is an amazing city with its high rise buildings, tropical weather, pumping nightlife, and beautiful women (can’t forget about this). Interestingly enough, I noticed another addition while during my visit awhile back. At least twenty cranes dotted the skyline; by far the most I’ve seen in awhile. I started to think about what some pessimists are saying about a pending real estate market correction and if there is any truth to it. Is it coming? Does it make a difference? Should I, or you, care? It there is to be a market correction, what smart financial moves can I make now to prepare for the future?
In the real estate market, I am bullish— displaying a more aggressive growth strategy in my real estate investing game. Many savvy and experienced investors and firms all around the world follow the same investing strategy. Surveys taken of sophisticated global investors uncovered that 90 percent of investors plan to expand their portfolios in America in 2016. Indicators of a boom and subsequent corrections are not only floating around the Sunshine state and city limits of Miami. New York City, throughout California, and various areas of Indiana are building more and more. And more!
What Determines A Flop?
If you look back to the past, you can learn through what has happened and the lessons taught. Historically, it's oversupply, speculative buying, a lack of affordability, unsustainable investments, etc. that have burst the market. The Financial Times, as well as other news publications in South Florida, have investigated that the boom in inventory is leading to cooling in sales, with changes in prices in both Miami and NYC market sectors.
In Orlando, FMA data reports that it now requires almost double the average local income to afford the average housing cost. There are facts and reasoning as to why and how this local growth is supported. Global investment in the United States, fear of the stock market, increasing rents, and Airbnb are all contributing factors. The important question remains; is the market sustainable?
Looking At History
Based on the past, we can deduct that there will most likely be more fluctuations in property prices. These changes could occur in one year or seven years. Smart investors understand this but are still buying. What they know is that, over time, real estate always trends upwards. It may dip, move sideways, or stay stable for a time, but eventually (long-term), the market will go up. Maintaining a long-term outlook is what keeps savvy investors in the game.
To “guarantee” that your financial needs are taken care of in both the short-term and long-term, investors must be smart about buying. Warren Buffett, one of the shrewdest and most successful investors of all-time, advises that one should never purchase on speculative value, but buy based on production. If a property can continue yielding a positive cash flow, then it’s irrelevant as to whether other people think it will be worth this year or the next.
I look for properties that are cash cows; investments that will result in consistent profits while avoiding markets that have tendencies to show significant fluctuations like New York City and Miami. I search out investments that are sustainable, will remain profitable, and retain their flexibility just like Grant Cardone, I am 100 percent pro real estate, but it would be foolish for me to ignore the fact that there are no clouds on the horizon, especially when the plethora of cranes create unignorable shadows.
Part of why I have this blog, the website, and share my career is to offer transparency within the world of real estate. I want others to avoid the pains that millions have faced by making adverse or uniformed investing decisions. Much of what I have learned is through study, experience, and learning from the greats. Take time out of your day to study diligently and invest wisely, and you will create a rewarding career for yourself.