The first thing you need to do is to understand that the market is cyclical. That is, it won't keep going in any one direction permanently. OK, so over a long term of 5, 10 or more years, there will be a definite trend but don't expect a year over year equity increase.

This fact free you from another popular real estate agent strategy... the "buy now because the price is going up" plan. Honest agents will show you market profiles that justify the asking price of any property. These profiles should include not only the asking the selling price also. There are agents that make statement like; "the market will go up 10% this year," or "that you will make your investment up in 2-3 years." Now unless they have a crystal ball or can see into the future, these are fluff statements that should raise a red flag in you mind.

Never buy real estate and base the purchase on something happening in the future. If it's a "good deal" it's a good deal NOW not in 10 years. A lot can happen during this waiting period.

This doesn't mean that the market doesn't get red hot or that if you don't jump onto something immediately, it ends up sold. These things do happen. But it's important to remember that there are other factors at work in any real estate market but especially evident in a robust or seller market. These include the GREED FACTOR. People look back several years and then use that information to decide that the market will continue to go up in the future. "Previous returns are not indicative of future results" is a popular statement on many investments but some people don't seem to believe it when it comes to real estate.

Next up is the GREATER FOOL THEORY. This is one that even bankers use to justify lending to some people who can barely qualify. The theory is that once the property is sold and the loan closed, the increase in appreciation will give the bank - or owner better protection. The idea is that the owner can sell it for more money to the next person willing to pay to get into the market. The problem is that once again, is assumes a continued positive appreciation in property values.

People seem to forget that it wasn't that many years ago that property in much of Florida was sold off very inexpensively. There was little to no appreciation in many real estate markets throughout the country for years. A normal market will return sooner or later.

By buying into the hurry up and purchase strategy, you run the risk of buying at the top of any real estate market. This is especially true however when talking about a hot market like Miami Real Estate.

Purchase wisely as a good investment continues to be a good investment no matter what the market.

Posted by Gergana Trayanov on December 13, 2008 at 12:00 AM

About Gergana Trayanov
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