wearmanyhats

During the nineties and the first have of this century, real estate investors who had made it big, found bigger money selling their business on television, in books, and on the internet.  Two big names were Robert Kiyosaki and Charleton Sheets.  Both offered different training, but there was no doubt that they had lived the best times for real estate investing.  Kiyosaki got out when he felt the prices were too inflated.

The problem is that new investors had no idea how fickle the real estate investing market can be. But in 2008 it caught up with those investors dramatically.  The market tanked, and good investors got caught holding mortgages they couldn’t afford.  The result has been a slap in the face to people who worked hard to flip downtrodden properties, and most likely there are some who will walk away from real estate investing to never work with it again.

Right now, real estate moguls are buying  with both hands.  The problem:  leverage is a now an enemy in some markets.  Here is the problem:  if you put 20% down on an office building, for example, because the sellers have gone into foreclosure, it usually looks like a good deal.  In normal economic times, it is.  In a recession that is close to a depression, that time period when renters may not easily be found can result in the new owners not finding tenants.  Then the property forecloses again.

Cash is king now, but only if a buyer can guarrantee that there will never be a payment missed.  Investors who bought too many new properties can easily run up so much debt that they can not make payments if their tenants don’t pay up.  This has been a serious teaching flaw of these “Get Rich by Real Estate” gurus who don’t explain that to the novice real estate investor.  And that is a moral flaw if there ever was one.

Trackback URI | Comments RSS