Roger Schlesinger

This is the first of a three-part discussion on the real estate market as we know it in these United States. I believe that the market is offering everyone a unique opportunity while pessimism reigns. However bad it looks, for those who understand that money is made in most investments when you “buy right” not “sell right,” the timing couldn't be better. If you are of the belief that the real estate industry will not return to its former growth mode and instead languish with problems for decades to come, this article and the following two are not going to dissuade you, and you might find it better to read something else. Having said all that, let's get on with it.

The title of this piece testifies to the fact that you need some extraordinary courage to do what I find perfectly normal: buy real estate in a down cycle. I will spend the rest of this column showing you why it really doesn't matter when the real estate market turns—this year, next year or in three to four years—because you cannot find yourself in better shape. The vehicle that will put you into that shape is a 15-year loan. Guaranteed!

Those who can only force themselves at the bottom of the cycle find that they either never buy or they change their parameters. Wall Street wizard and presidential advisor Bernard Baruch said, “Only fools and liars buy at the bottom and sell at the top.” The problem with insisting on buying at the bottom is that it will take about six months after the bottom is hit before you know that you’ve seen the low point. Those six months plus the time you’ve spent waiting for the bottom are too precious to lose. So drop the ball and chain that is holding you back from making a spectacular purchase and begin your search in earnest. You have an optimal chance of doing something that doesn’t come along that often: buy a piece of real estate without much risk and with tremendous upside potential.

Let us begin with the three most famous words in real estate: location, location, location!

Simply put, you need to be where the growth will occur, first and foremost. There are superior areas, good areas, fair areas and poor areas to choose from. Forget about the superior areas and the poor areas and concentrate on the remaining two: good and fair. Superior areas are too expensive and poor areas are a time challenge with the possibility of never recovering in a normal lifetime.

Once you have picked the area, you need to find a property that is undervalued because of overbuilding or excessive speculation, not because it has physical problems. Then make your purchase and watch the magic begin. If you buy a house for $375,000 and put $37,500 down, your new 15-year loan will be $337,500. Here is what you need to know:

Roger Schlesinger

Roger Schlesinger's Mortgage Minute is heard on hundreds of radio stations and daily on the Hugh Hewitt radio show and Michael Medved shows. Roger interacts with his hosts and explores the complicated financial markets in order to enlighten his listeners and direct them along their own unique road to financial freedom.