Get Rich Fast (you chump)

[Enuff2Eat]

Many people like to brag about themselves, their looks, their health, their wealth, their power, their spouse, their kids, their job, their money... that's probably true with this professor. however, i somewhat do believe with what the professor said. There are plenty of people that i know makes good money in real estate investing. Heck, in my neighborhood anyone bought their house 7-8 years ago is now double their money, can you just imagine if they bought 5 units, even at full price 8 years ago, they still have a lot of equity.

my baby sister never broke $40k salary has almost 1/2 mil in real estate equity (here you go bragging again..) and it's all luck that did it for her. if this professor is smart which i think he is, he probably done twice better.



enuff

 

[roadtoharvard]

Tonight I was chatting with tennis buddies over cold ones and asked one of the guys who teaches econ what he thought of the interest rate adjustment. Talk turned to money market returns, the bump today in the market and prospects over time. After awhiie of this, the econ prof looked at me, chuckled and said, "You need to stop worrying about five percent, six percent, seven percent. That's nothing . . . that's other people using your money. You should be in real estate and looking to double your money every couple of years." When I asked who does that, he said, "I do. It's a matter of leverage." Apparently he has been buying and selling a lot of local properties over the years and has done well. But, was he blowing smoke? Are there really lots of people out there who constantly and inexorbably get rich by buying up with borrowed money one 100 k property after another and then double their out of pocket when they sell it off? My assumption would be that for every person who does that successfully, many do not. I drove home feeling like a chump thinking maybe I should have been trolling for properties the past few years rather than agonizing over money market and index fund yields.

More power to the professor if he did it. I'd have asked him to pick up the tab afterwards though

 

[Spanky]

my baby sister never broke $40k salary has almost 1/2 mil in real estate equity (here you go bragging again..) and it's all luck that did it for her. if this professor is smart which i think he is, he probably done twice better.



enuff

That's mostly prevalent in areas such as the Bay Area and Southern Cal. Practically anyone who purchased a house 10 years in those areas is doing quite well.

 

[honobob]

In Columbus, Business First reports, the median price of housing fell in the first quarter. The latest statistics from the National Association of Realtors show the median price, or the midpoint in the price range of homes sold in the region, declined to $148,100 in 2006 after peaking at $152,000 in 2005. The decline was the first since at least 1979, when the median price was $47,100.

WoW Columbus OHIO?! That's an annual average appreciation rate of over 4.5% over 26 years! So my 20% down on a $47K home ($9,400) and 25 years of positive cash flow is looking pretty good!

 

[packrat44]

Bonnie and Clyde also had a get rich fast plan and they also did not have to worry about outliving the money. Don't think I would recommend following either the econ prof's or B and C plan. Both plans could have very undesirable outcomes.

 

[Milton]

There is one thing to remember. People tell you about their successes not their failures.

Absolutely right.

I don't know your friend, and have no idea whether he is telling the truth or not. But I wonder why, if he has many years experience of doubling his money bi-annually, he would stick it out as a professor all the way to a full pension. Actions usually speak louder than words.

 

[Spanky]

Absolutely right.

I don't know your friend, and have no idea whether he is telling the truth or not. But I wonder why, if he has many years experience of doubling his money bi-annually, he would stick it out as a professor all the way to a full pension. Actions usually speak louder than words.

Sticking around for a full pension is not a bad deal (complementing his wealth from real-estate deals). His workload and schedule is probably pretty flexible or light. It's also a very secured job with almost zero chance of getting fired.

 

[tryan]

Does anyone have proof of a property selling at 50% less of a previous market value?

Absolutey ... in MA (Lowell, Lawrence, Worchester) any Boston suburb: peak 1987/1988 to bottom 1993/1994. Bought a dozen units for a dime on the dollar (but these were RTC/HUD auctions). 50 cents on the dollar was a bargin for any bank holding dozens of REOs/OREOs. Most were selling for 30-40 cents on the dollar (that's where I made the second half of my wad).

Note these values are computed from the foreclosed note (purchase price may be higher if a deposit was made or lower if closing costs were rolled into the sale).

Where there is chaos there is opportunity.

 

[Jay_Gatsby]

Never argue with a business professor, just nod and say "that's great", and move on............

What's the expression?

"Those who can, do. Those who can't, teach?"

 

[Milton]

Sticking around for a full pension is not a bad deal (complementing his wealth from real-estate deals).... It's also a very secured job with almost zero chance of getting fired.

Yes, fair enough ... but if he has the ability to consistantly double his money every two years, the miracle of compounding says that his employment income and pension entitlements would quickly become chump change, hardly worthy of notice.

His workload and schedule is probably pretty flexible or light

Well, maybe. In my limited experience of academe, there are pointless committee meetings to attend, papers to grade, students to counsel, lectures to prepare, seminars to give, boring articles and books to write ('publish or perish'), etc. Like all jobs, it has its fair share of tedium ... it is not all beer and skittles at the faculty club.

 

[FinanceDude]

What's the expression?

"Those who can, do. Those who can't, teach?"

You're killing me.......

 

[bosco]

What's the expression?

"Those who can, do. Those who can't, teach?"

"and those who can't teach administrate."

 

[Hamlet]

You missed a step.

"Those who can't teach, teach Phy Ed."
"Those who can't teach Phy Ed., administrate."

My high school principal and vice-principal were ex-gym teachers

"and those who can't teach administrate."

 

[FinanceDude]

You missed a step.

"Those who can't teach, teach Phy Ed."
"Those who can't teach Phy Ed., administrate."

My high school principal and vice-principal were ex-gym teachers

How about athletic directors? Isn't that a somewhat cushy job? In my high school,he got to pour the beer at the "secret" football parties........

 

[Jay_Gatsby]

How about athletic directors? Isn't that a somewhat cushy job? In my high school,he got to pour the beer at the "secret" football parties........

Reminds me of the following line from Grease:

"If you can't be an athlete, be an athletic supporter."

 

[Bestwifeever]

I always hear it was "Those who can't teach, teach education."

 

[skyline]

To the OP - remember that most people have very short term memory, even econ profs. In the 90's, you were a chump if you were in real estate and not stocks. In the last 7 years, you were a chump if you were in stocks and not real estate. The question is (unless you think you can time the market) what's the historic performance?

Even with leverage, real estate isn't a big winner when you look at the long term - most studies of property values spanning periods of 25-100 years show residential real estate returning around 3-4%, even when isolated to regional performance in areas like SF and NY, while equities return around 10-12% over the same period. With a 5x leverge, you can up real estate's return to around 15-20% historically, but then factor in property taxes and you're back to around 10-15% historically. And that's before all the transaction costs and maintenance costs that go into properties (that no one ever tells you about when they boast about their performance). Of course, you do need to add back rent and tax benefits, but in the end I think you get close to a wash (although my opinion is that stocks still come out ahead)

The whole locational/regional variation in performance is a red herring as well - think about it, if homes on the river with mountain views really performed consistently better than less desirable homes, then those homes would be 100's of times the cost of the lesser homes if they really appreciated faster in the long run (didn't someone own those properties decades/centuries ago? Weren't those properties more expensive back then? Did the actual ratio of the costs of those properties change significantly in the long run?). The fact that they don't points out that historically, they go through the same level of appreciation (although they start with higher initial appraised value)

I'm not knocking real estate - I own a great home that has more than tripled in value since I bought it in the late 90's. But I also own lots of equity and did amazing during the tech boom as well. They're both good assets to own. For me, it's more about volatility - stocks can drop 20% in one year, while real estate rarely falls more than 5% annually.

Now, the real question you should care about is whether you should now go into real estate today, given the current economic situation, and the fact that real estate has just wrapped up the single greatest boom period in US history? My opinion is NO WAY.