Construction Plunges! Don’t let your real estate investments suffer the same fate.

An Associated Press syndicated article out of Washington D.C. on Feb 17th trumpeted that fact that housing starts are at their lowest level in almost a decade. Without being rude, let me respond to that with a resounding “Duhhh.”

It never ceases to amaze me that people are surprised when the market responds in a logical manner to illogical gambles promoted by many and taken by the mathematically impaired. You see, if home prices are going up faster than buyer’s ability to afford them and if the number of units being built outpaces the growth of population, what in the world did you expect to happen?

The telltale signs of problems are everywhere, still speculative building continues until reality is forced upon the players through empty bank accounts and accounts payable ledgers bursting at the seams. This should not surprise anyone, but it does. Unfortunately, unlike thoroughbred horse racing, in real estate if you wear blinders you are sure to lose the race. Without the complete picture of the industry, your area, market, population base and socioeconomic condition, you simply cannot make the best decisions possible.

It doesn’t take a scientist to track the numbers, calculate the odds and project the possibility of success. All it takes is the ability to add and subtract, and the willingness to actually do it! If you are unwilling to push the buttons on your calculator, you’ll still experience math. You see, you’ll be adding properties and subtracting net worth.

The single greatest reason for most investors to invest outside of the single family market; is the single family market. A real pro wants a level playing field and a set of rules to the game. That is impossible in a market dictated by over optimism, faulty financial principles and emotion. On the other hand, it is possible in a market where value is based on a properties ability to produce revenue and not on an inflated appraisal produced by some so-called “professional” after being pushed by real estate licensees and lenders in order to make a deal. (I am a real estate licensee and I am embarrassed by that behavior and hope it stops immediately. It hurts everyone involved.)

As you consider real estate investments, look long and hard at not only the property itself, but at the industry segment in which it operates. The more accurate information you can collect, the finer point you can put on your pencil in order to buy right. If you can’t get the data you need on a property, put the pencil away. Better data makes better decisions, and better decisions make better deals. Here’s to hoping you make good ones, based on sound business and economic principles. There a numerous great deals to be made. Go out and find them. And remember to take along your calculator. Good luck.