Real Estate is a long term investment and the best time to buy is when the market is depressed. It's all about location, location, location. The real estate prices fall over several years before recovering. We bought our home in Southern California at the end of 1995 about 18 months after the Northridge earthquake at a time when prices were extremely depressed. We closed the purchase in March 1996 (it was a new house) and it has more than quadrupled since then. California has been going through a labor pool shift for the past 25 years. Lower income working class families are moving out and are being replaced by more affluent professionals. This is why prices remain high and over the long run, this trend will continue. Keep in mind California is the 5th largest economy in the world and has an industrial base that supports highly skilled work force. The weather is also another attraction. After the 2008/2009 financial crisis, we were looking for properties around the Pacific Palisades and Santa Monica but prices were down but were still relatively high. Those properties are even higher today.
My generous father-in-law gave us a home in Switzerland just outside Lausanne in the late 90's. It's well located in a very affluent area with great views of Lake Geneva and the French Alps. We spent several hundred thousand over the years renovating this home which was built in the 50's. We saw the potential and decided it was worth the investment. It is currently worth 5 times the value of our home in Southern California and due to the limited supply of homes and the location of this home, it will continue to climb in value. My father-in-law turned 84 today and has 94 rental apartment units. He never invested in the stock market and has a great income stream that allows him to stay at home with full-time staff to take care of him and my mother-in-law. Plus his active involvement in his properties keeps his mind active and in good health. He certainly learned to play monopoly well.
In March 2011, I was still working and on a business trip in South East Florida, and just happened to see how far real estate prices had crashed in Florida. They were literally down to 1981 (Miami Vice days) prices in many coastal areas. I convinced my wife that we should buy property in South East Florida. We flew back to Florida in June 2011 with two other couples from Southern California that we knew well and spent two weeks looking at coastal properties in Palm Beach, Broward, and Miami Dade counties. We made all cash offers on three properties. All were modern upscale high rise condos located in Downtown West Palm Beach and Downtown Miami. Two fell through and one was accepted by the bank. Contrary to comments made about high transaction costs for real estate, it all depends on the location and type of transaction. In Palm Beach Country, the seller pays most of the closing costs. Since it was an all cash transaction, our closing costs amounted to $173. The property has quadrupled in value since our purchase in 2011. Incidentally, a very high profile real estate billionaire purchased the majority of the units in our condo as well as seven other properties in South East Florida and added them to his rental portfolio. The other two couples that we know bought homes in a gated community in Wellington Florida and have done well with their investments.
So here we are again heading into a deep recession. Would we buy another property? We are certainly looking again. If the price is right, we certainly would. We are sitting on a lot of cash now. Our experience is that real estate is one of the best long term investments you can make. It's all about location, location, location.