We have become a society where we want everything now. We fast forward through TV shows, get constant updates on our phones and if results don’t happen overnight, we dismiss them as a failure. There is no area that is more ripe with short term thinkers than in the world of investing. Regardless if you are investing in stocks or real estate, there is the constant demand to get it and get out with a handsome reward. This can be a lot work for some investors in the short term, but you also need to keep your eye on the long run as well.
If you were told that the real estate market is up near 45% in the last ten years, you would probably not believe it. With all of the misery in the market from 2008 on, it would seem that the market has yielded minimal gains. Sure, the market exploded in 2003-2006, but surely most of those gains were given back, right? Even with the dramatic reduction in property value over the past five years, the market has still thrived in the last ten years. If you held on to your property and rode out the ups and downs, you would realize this return.
Even if you look at the market in the relative short term from 2009 to today, you will see gains. Many investors had the mindset that they weren’t going to buy anything for fear that the market was going to drop further and there was an endless bottom. Just in that short time alone, the market is up nearly 20% depending on what part of the country you invested. Short term investing can give you quick returns, but if you are looking for substantial upside, you need to look well into the future.
The main reason why more investors don’t invest with the future in mind is the need to turn property over and pull capital out. This is a great strategy and can be very effective, but every year moving forward you should look to add one long term property to your portfolio. It doesn’t need to be a big property or even an expensive one, just something that can become an asset years down the road. You will have to worry about tenants and property maintenance, but five to ten years from now, when the market shifts, you will have multiple options and can realize a healthy return.
If you look at the most successful investors, they see opportunity in every market. Down markets are nothing more than a cyclical event that is sure to correct itself. If you invest thinking about the long term, you will not have to worry about market cycles and monthly property value updates. You can find a good property, regardless of price and wait. You will have to exercise patience and take care of the property, but ten years will be here before you know it.
Having a mix of short term projects and a few long term holdings is how you build a portfolio. It can be very tempting to only focus on properties you can quickly turn over, but every now and then think about the long term as well.