Carl Richards

Carl Richards is a certified financial planner in Park City, Utah. His sketches are archived here on the Bucks blog and on his personal Web site, BehaviorGap.com.

It was a rough first quarter for the housing market. While home sales were up 11.3 percent in March over February, they were down 21 percent compared to over a year ago. And home values, well, they dropped again. Besides the difficulties with getting credit, people are just uncomfortable buying real estate right now.

Compare this to the mid 2000’s when everyone was a real estate investor. Back then, multifamily properties had multiple offers the day they hit the market, and being a real estate investor seem like a sure thing. After years of being scared away, more and more people started to think about real estate as an “easy” investment.

Buying distressed properties might be tempting now, and it very well could be a good idea. But it is far from a sure thing. Just because something has fallen 40 to 50 percent doesn’t mean it can’t fall further or stay down for a very long time. There is, in fact, evidence that the housing market has further to fall. And investing in real estate requires skill and careful analysis, not just a kit you buy on late-night TV.

I don’t have anything personal against real estate. It may be a legitimate part of your investing strategy. The problem happens when investors don’t stop to do the math.

Too often, investors get sucked into the buying things they shouldn’t when they fail to add up the real costs. In the case of real estate, how much in property tax, upkeep and insurance will that “sure thing” cost you? How much time will be required, and what is that worth?

Real real estate investors take the time to make sure buying an investment property will “pencil” before they buy it, and they pass on plenty of deals that won’t work. There are lots of calculators that can help, including the one here at the Times.

But the point is that no matter how cool it might seem to buy distressed real estate at this particular moment, if you lack the skill and experience, you might want to consider a certificate of deposit. At least there you won’t lose money, and with the time you save, you could focus on earning a side income or just enjoying your life.