Although real estate investing has to be done carefully, as has been shown dramatically lately, it is in general safe to do so. It is not wise buy it by getting a very large home loan based on the assumption that real estate prices will necessarily continue to go up. There have been many real estate “bubbles” that have burst before this latest big one did, and even in a more normal real estate market there are always cyclical ups and downs. You also should not assume that the income necessary to make large monthly loan payments is going to continue to come in. Regardless of what you may be told, investing in real estate should only be contemplated if you are able to keep your loan small by making a large down payment. If this is the case, then such an investment can make you good money because in addition to the earning through the rise in your property’s value, you can normally rent your property as well.
The main way you can be successful in real estate is by timing your buying and selling to coincide with the peaks and valleys of the real estate cycle. For instance, currently we are probably at the bottom of a valley so now you should buy. The hard part is figuring out when a new downturn is going to begin. Although countless real estate investment gurus say otherwise, there really is no special formula allowing you to know how long a price rise will last. It is true though that historically, price peaks have come at roughly eighteen year intervals, with prices then stabilizing a while before going down. The downturns tend to be steeper than the upturns, so you can expect the coming upturn to last around twelve years, after being flat for a few.
On the other hand, it could quite easily last a much shorter or longer time. How long price rises last depends on many factors, such as how healthy the economy is in general. You must be willing to tolerate a certain amount of risk. If you are very risk averse, a better strategy is to hold on to real estate for several decades without trying to catch peaks or valleys. Its price is still probably going to go up faster than inflation over the long haul, and meanwhile you can earn a good income through renting.
