I went to a landscape seminar years ago where the speaker offered a sage bit of advice. He said that when landscaping a property, it was important to consider the fact that trees and shrubs grow and get larger over time. That should seem obvious, but too many people landscape a property only considering how the property looks today, without considering how it will look in the future. He said that envisioning how the landscape will look 20 years from now will prevent mistakes like trees too near walks or foundations where they can cause damage, or large thorny hedges along narrow walks.
There was a time when real estate investment was also considered in a similar manner. The odds were that you couldn’t get much of a return overnight, so long-term planning and analysis was critical.
During the boom however, long-term real estate investing seemed a quaint, old-fashioned idea whose time had come and gone. Now that rampant appreciation is gone though [Heck, in most places these days, any appreciation is gone.] you’d think that people would have returned to the old-fashioned, long-term way of thinking. New ways seem to be dying hard however.
So what got me going on this? Two rather disparate articles were sent to me yesterday. One was an article on a couple of bankrupt condo conversions in Tucson, and the other was about the excess of commercial space in Phoenix. [Hat tip to M.R. and L!] What they both had in common was the mind-boggling level of short-sightedness from different "experts". Take for example this comment from the condo story:
Condo conversions made sense in the hypermarket of 2006 and early 2007, but not today.
Prices were higher in 2006-7 than they are today. Since when was "Buy high, sell low," ever a great investment strategy? How can a long-term investment be a good idea at one point and a lousy idea a mere two years later? Continue reading Chronic Short-sightedness In Real Estate