When an investor starts investing, they enter an entirely different world a new world full of new ideas, new ways of thinking, and new ways of measuring success. Living in this world is fun (and financially freeing!) but it also means one inevitable reality: You will frequently be asked a question from people who are not involved in real estate investing and just dont understand how it works.
And the question is
What will happen to house prices are they going up or down?
I cant tell you how many times Ive been asked this question or one exactly like it (what direction is the housing market going? or is now the right time to buy? and so on).
At first, I was stunned at how often this question came up, as if it was some kind of script in a play: As soon as I said I was a real estate investor, the non-investor would ask, what will happen to house prices?
Then, I became frustrated at how often the question was asked because it revealed just how different the investors way of thinking can be from the average homeowner who has never invested before.
Today, I take a different approach. If you are asked this question, heres how to answer it:
- Be gracious. Remember that there might have been a time (long ago or maybe not that long ago) when you thought along the same lines focused on appreciation over cash flow, and not understanding just how regional the property market can be.
- Invest in them. Theyre asking because theyre curious so invest some time in them. Who knows, with a bit of education, you might have someone who would be interested in investing with you. (Thats exactly what has happened to me).
- Think ahead. You know youll be asked the question so think ahead and proactively put together an answer in words theyll understand that will help them. (Ill give you some ideas in a moment).
- Remember that its a journey. They may not get it right away. Ive had to give the same answer to some people multiple times. Thats okay, everyone is on a journey. Let your words and your lifestyle reflect how your investing-for-cash-flow approach is the better approach.
So, how do I answer this commonly asked question? Ill usually say something like this:
I dont really know what will happen to house prices because I invest for different reasons. If youre buying your own home, youll want to buy low and sell high, so it makes sense for homeowners to pay attention to housing prices. But as an investor, I dont plan to sell my properties so I dont really pay attention to the direction of house prices. In fact, even if house prices drop, Im okay because Im investing to earn rental income. I prefer to pay attention to the economic fundamentals of a region that will influence the likelihood of finding good income-producing properties.
Youll inevitably get the question. So find an answer that graciously guides the listener and who knows what could happen you may start a conversation that eventually turns into some private money!