Seasoned investors look at big picture - Experts say "there really is no bad time to buy real estate".

 

HONOLULU ADVERTISER   August 13, 2006

BY LISA SCONTRAS

Custom Publishing Group

 

If you think building wealth by investing in real estate is easier for Realtors to do than the average person, you might be right.

 

It’s not, however, because Realtors keep all the good properties for themselves or have a crystal ball. It’s because they have a plan. For John Hayama, partner and active investor investor at Prudential Locations LLC, investing in real estate was part of the reason he became a Realtor — it was part of his master plan.

 

“I was in sales and decided I’d rather sell something that I wanted to invest in myself,” says Hayama, who got his real estate license in 1972 and bought his first investment property around the same time.

 

He decided on a career selling real estate rather than one selling stocks and bonds because he liked the idea that investing in real estate was done, to a large extent, with “other people’s money.” “Initially I chose real estate, because I liked the fact that you can use leverage to accumulate wealth,” says Hayama. “You can use a portion of your money to make an investment, and borrow the rest. And the same holds true today.” Hayama, who has never regretted buying a piece of property, regrets selling one. “I sold the first house that I ever bought because at the time, the rent didn’t cover the $425 a month mortgage payment,” he says. “That was the dumbest thing I ever did. If I owned it today, I’d have no mortgage and, conservatively, be bringing in $1,400 to $1,600 a month.

 

Statistics at the National Association of Realtors show that since 1968, the national median home price has increased an average of 6.4 percent per year. PMI Mortgage Insurance, who also tracks national trends, reports that if you owned a home for 10 years between 1986 and 2005 in any of the 50 largest metropolitan areas, you profited 100 percent of the time.

 

Michael Koyama, Realtor and partner at Prudential Locations, has owned 14 properties since buying his first in 1986 and says if he’d kept all of them, the portfolio would be worth about $6 million today.

 

"My first purchase was my own home, then I bought a larger home and kept the first one as an investment," says Koyama, who took advantage of capital gains and tax benefits to continue upgrading his personal residence. "If a person were more conservative, they could stay where they are and buy a smaller property. The key is to have a goal, develop a plan and take action."

Both Hayama and Koyama agree that today’s low interest rates make it a particularly good time to invest in the home market.

 

“I think history will show that there really is no bad time to buy real estate,” says Hayama. “If you’re going to use leverage and get a mortgage, it’s going to cost you less today than if you wait.

 

“Remember, you deal with sales prices only twice — when you buy and when you sell. You deal with cash flow everyday — those are the payments you make based on the interest rate.” Koyama, who says his own retirement assets are largely real estate holdings supplemented by a tax-deferred pension plan that is invested in the stock market, advises new investors to make a plan.

 

 

“I would encourage investors to seek out a mentor and a good real estate advisor who can help them with their investment plan,” says Koyama, who purchased two properties last year, two more so far this year, and plans to make at least one more next year.

 

“Wealth building is a long-term process,” says Bill Chee, Prudential Locations president and CEO. “In the 36 years of doing business, never have I heard of someone who has held a property for 10 years say they regret buying it or they lost money on it. It wouldn’t surprise me, though, in 10 years to have people look back to 2006 and wished they would have bought something.”

 

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