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Getting rich in real estate
Old 07-06-2005, 09:31 AM   #1
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Getting rich in real estate

Anyone besides me feel they are missing out on the huge money being made in real estate these days? Don't get me wrong, my own personal residence has appreciated nicely (probably doubled in last five years at least...and its paid for), but since I have no plans on moving, and no plans on selling, it really doesn't do much for me (except perhaps increase my insurance and property taxes!)...seems a lot like the late 90's when everyone was getting rich in stocks and I only caught the tail end of that boom...(but also missed a big part of the crash)

Not much I can do about it now, 'cept of course bemoan all the investment properties I had thought about buying a few years back and didn't...oh well...need to figure out whats coming next instead...no way I am jumping in on this now...
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Re: Getting rich in real estate
Old 07-06-2005, 09:41 AM   #2
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Re: Getting rich in real estate

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Originally Posted by farmerEd
Anyone besides me feel they are missing out on the huge money being made in real estate these days?
Yup.* *I feel exactly the same way.* *I've been thinking, "It's too late now, for sure." for over a year.* *But certainly it's too late now.

At least we didn't loose a bundle in tech stocks.

My realtor pointed out that there will be some bargains to be had, when/if the people that are leveraged to the hilt with interest only morgages all start needing to unload...*

I'm waiting....
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Re: Getting rich in real estate
Old 07-06-2005, 10:32 AM   #3
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Re: Getting rich in real estate

The best lesson from this boom is a very old one.

That is:: One of the best investments for everyone is to own your own house period.

On a percentage basis few people really struck it rich by flipping, dipping or whatever kind of ipping, but the media loves those stories.
It won't be much longer until the real gee whiz stories will be how the rookies blew their life savings on some condo that only was half finished or whatever.

Same with the tech bubble, lots of people lost money(me included), but the ones you hear about that really lost everything on tech stocks just flat didn't know what they were doing.
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Re: Getting rich in real estate
Old 07-06-2005, 11:27 AM   #4
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Re: Getting rich in real estate

Sacramento area, 1996, mcmansions (4000 sq ft on 1/2-1 acre, mostly a few years old) selling for high 200's and low 300's. Was going to buy several, girlfriend talked me out of it. All have more than doubled in price.

Later in the same area, 1998, 1400 sq ft 3bd 2ba's, brand new, selling for 140-150. Was going to buy a half dozen and rent them. First seller backed out on me 3 days before close and I got sour on it and decided to wait. Prices popped to 180-190 each and 'the numbers' to rent no longer looked so good, so I bought some more QQQ's instead. Those sell in the 300-400 range now.

I think this ride is about over though. When "everyone" thinks "anybody" can make money on it, the bloom is off the rose.
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Re: Getting rich in real estate
Old 07-06-2005, 12:31 PM   #5
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Re: Getting rich in real estate

In Europe definitely -- 400% appreciation in 10 years! But I listened to the 'experts', didn't I! . . . And Experts kept miscalling the peak . . . By the time I realized their opinions were just that - appreciation began to slow. Now rental yields were still ok at the time, but it would have meant dealing with tenants, and as one poster aptly stated - root canals are more preferable! Basically too difficult to pull off especially when said employment was with a mega corp, expecting 80-100 hour week dedication.

Time wise Europe was ahead in the worldwide RE bubble. Today at best, mainland Europe is flat, and at worst (as with the UK) - its slump time. Eastern Europe and the accession states are still being heavily marketed - but most consider the smart money has already left! Meanwhile rental yields have collapsed, and time to rent is now 3 months or even non-existent in parts

Thought about the US also - Midwest area. Glad I didn't - didn't know enough about multi-units, and assessments and property taxes erode rental income.
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Re: Getting rich in real estate
Old 07-06-2005, 12:34 PM   #6
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Re: Getting rich in real estate

For me, the part that eats at me the most is not that I wasn't smart enough to start "flipping" house to make a profit, but instead that now that things have gone so crazy in many markets, the dream oceanside getaway house that was completely afforadable to me just a few years ago are now so expensive to put them out of reach, or at least out of what I would be willing to pay for them given the amount of time I could spend there...houses on the water I was looking at for under $300K are now $500-$600-$900K for the very same places.(and that is much to big a chunk to tie up in a vacation house, at least for me)...so its not so much that I didn't profit from the run-up, its that the likelihood of not being able to own my own getaway place at the beach is becoming less likely....

Oh well, I guess there are worse things than having to *rent* that ocean front estate...certainly during hurricane season its never bothered me all that much that I didn't own....
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Re: Getting rich in real estate
Old 07-06-2005, 12:45 PM   #7
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Re: Getting rich in real estate

Get a boat. All the oceanfront you can handle.
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Re: Getting rich in real estate
Old 07-06-2005, 03:29 PM   #8
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Re: Getting rich in real estate

"Get a boat. All the oceanfront you can handle."

that is my plan in FIRE I am working on a good USED one....TO BOOT.
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Re: Getting rich in real estate
Old 07-07-2005, 09:22 AM   #9
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Re: Getting rich in real estate

I'm one of the dumb luck guys getting rich in real estate...on paper anyway.

1. paid off house* * * * *$170k now $400k
2. Beach townhouse* * $180k now $750k
3. Inherited house* * * * $0* * * now $275k


Hard not to figure in some of this when asked, "How'd your portfolio do for the first half?"



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Re: Getting rich in real estate
Old 07-07-2005, 12:29 PM   #10
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Re: Getting rich in real estate

Quote:
Originally Posted by farmerEd
Anyone besides me feel they are missing out on the huge money being made in real estate these days?
Lots of penny stocks doubled yesterday too, and I didn't own any of them. I coulda been way short on the euro or the British pound and made big bucks this morning, but I don't regret missing that "opportunity" either.

Homeowners make money because their real estate is an illiquid asset with high transaction costs. Most hesitate to day-trade their real estate (or it's just too much hassle to move every few years) and end up becoming buy & hold investors. (Imagine if you could sell your home for a few mouse clicks and a $7 commission, and then surrender possession in three trading days.) If it's too hard to trade (and lose money) then the opposite eventually happens. When homeowners move it's rarely because of a detailed analysis of the fundamentals & technicals. It's for emotional reasons like "I'm sick of this place" or "There goes the neighborhood" or "I'm upgrading" or "My job is moving" or "I need to raise cash for groceries." How many of us have sold stocks for that reason? (Well, maybe for that last reason.)

If your home ends up being the equivalent of NASDAQ 5000 on the downslope then you can still go into your bedroom and pull the covers over your head. (You might not even hear the foreclosure notice being delivered!) If you have cashflow then you can keep paying the mortgage and enjoy the benefits of homeownership. It's a lot harder to do that with shares of CSCO or JDSU (or margin calls).

Spouse and I moved 19 times in our 20-year careers. Homebuying was never a financial decision but rather a desire for stability & control-- when we thought we'd be in a place for three years or more then we bought. Of the two places we've sold, we made money (Monterey) and lost a little (Charleston, SC). Our "smartest" decisions have been renting in San Diego ('94-97 in a flat market) and holding in Hawaii ('89 & '00-present). The '89 Hawaii home purchase has seen its peaks & troughs but has basically doubled in value in 16 years, less than a 5% APY and, after-tax & after cap expenses, less than inflation. I shudder to think what would have happened to our lives if we'd managed to sell into the peak of 1990-- we would have "upgraded" into a much more expensive home, a huge mortgage, a tenant necessary for cash flow, and an hour's gridlocked commute each way. (We probably wouldn't have become parents either!) The '00 home purchase has also doubled but it remains to be seen whether the landing is soft or hard-- irrelevant outcomes since we're not selling. Neither of those smart purchase decisions had anything to do with a quantitative unemotional financial analysis, but rather with expecting to be able to live there a while and wanting stability from landlords & rent increases. The '00 purchase was also our "dream house" bought from a very distressed seller-- more like Ben Graham rather than Peter Lynch. As workerbees & parents we certainly weren't in any position to be able to move (and it was a painful move!), let alone flip.

We sat out the runups in commodities and REITs because we felt the first has essentially been a currency play on a declining dollar and the second would have exposed us to way too much RE in our asset allocation. However if another real estate bloodbath happens sometime in the next 10 years, then we'd consider selling a chunk of equities to buy a distressed property for a cash-flow tenant. (It'd still be an over-allocation to RE but this time I have enough ER time to work our way out of the situation.) Landlording is a much different proposition than being a homeowner, it's not one to be entered into lightly, and those making money off it have basically done so by EARNING it with sweat equity.

So I don't feel that I'm missing out. I do feel that if another opportunity comes our way, we'll be ready. But unless our daughter wants a sweat-equity stake of her own, I might be too busy surfing to exploit an "opportunity".

Hmmm, time for another cup of coffee. Looks like a heckuva rush hour from our back lanai!
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Re: Getting rich in real estate
Old 07-07-2005, 02:28 PM   #11
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Re: Getting rich in real estate

Quote:
Anyone besides me feel they are missing out on the huge money being made in real estate these days?
Yup, I am still think'n about the 200k I couldn't scrape together 10 years ago to buy a 27 unit place near a new court house. Also think'n 'bout the countless auction properties I under bid by 3-4k. But hey, who had cash in the early 90's.

My point is ... get out of the herd mentality and position for the next down turn. It'll be years away ... but it'll happen. And cash will be king.

Need to walk the unbeaten path.
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Re: Getting rich in real estate
Old 07-07-2005, 02:29 PM   #12
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Re: Getting rich in real estate

Well said Nords I know some folks that put their whole port in the nasdaq and lost big.


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Re: Getting rich in real estate
Old 07-08-2005, 06:06 AM   #13
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Re: Getting rich in real estate



Nords nailed it. The profits (or losses) are never realized until the property is sold and for us selling is not just analytical but very emotional...as in "but, but, we just CAN'T sell the beach house!".



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