Real estate investors, take note!

There seems to be a growing amount of interest on this board about investing in real estate - which is always the case as real estate prices reach the "skyscraper level" in the market cycle - so I thought I would share an insightful (and true) statement made by Dr. Mark Zandi, Chief Economist at Economy.com.

"The day of reckoning will come," says Dr. Zandi. "The longer the housing boom lasts, the deeper the eventual downturn."

Now, for those of you who don't trust economists, a careful study of history shows that big market moves to the upside are usually followed by big market moves to the downside.

Call it Sir Issac Newton's law of "action" and "reaction" or whatever you want, but no market goes in one direction forever and ever and ever ... either up or down.

Rubber bands only get stretched so far.

Micheal Ross tell me that housing prices have gone out of site in Australia, just like they have in California where I live.

Whether you like it or not, many of the real estate markets in the world are in the stratospheric zones of very high risk.

Remember, the first rule of money is to know when to protect it.

Robert Campbell


Timing the Real Estate Market

Bought the house in 1994 for $200,000. Had it valued the other week... $690,000!

House up the road sold for $600,000 and the owners tore it down to build another house on the land.

Overheard woman talking to her mom about a super-upmarket one bed unit for only $390,000!

Young guy bought a place two years ago for $180,000 and it is now valued at $400,000 and he can't afford the taxes. HA!

Crazy.

Michael Ross


No craziness here

Hi,

Remember how we used to say "Hear about that 17 year old kid that started [whatever].com, and now two months later he's a billionaire? Crazy!"

Now all the dotcoms exploded like the Hindenberg. I for one miss the heady dotcom days.

Soon the RE market is going to explode like the Hindenberg, after which a lot of people will miss the good ol' RE boom days.

Just my educated guess ...

- Boyd

Hi,

Something else that's crazy is the way some Americans live in 4000 square foot homes (bought at the top of the market and big enough to house the average third world village), drive leased luxury cars, sport their Polo shirts and Rolex watches---and are always on the brink of financial disaster even before they lose their jobs.

Man, when the effluent hits the oscillator some of these people are going to become fearsome predators as they seek to defend their egos and their families. I'd be afraid to encounter them in a dark alley.

Just my idiotic opinion as always.

- Boyd

Boyd:

Ben Suarez call it "ornamental magnifiers." Agree with him, I do.

What's really interesting is that even Barnum mentions this behavior in The Art of Money Getting which you greatfully linked to the other day. Of course, in this day we might not think a fake camel hair shawl will impress anyone, but its equivalent might.

If you (as in anyone) is happy to drive an old car and live in an old house or mobile home and live an uncluttered life, no one sees you coming. They leave you alone. You get on with your life making money. Let them buy the depreciating do dads. While you get rich.

HA! One guy I was discussing a business venture with said, "You'll recognise me cause I'll be wearing my Calvin Klein shirt."

OH what a wanker. (Turns out his shirt was an imitation made in Bali shirt - and he was also wearing a fake made in Bali rolex, and hocked up to his eye balls with new car leases and living in an apartment he couldn't afford.) HA!

Know a guy worth about $15mil. Drives an old battered F150, gets around in old shorts and a T, does his own garden work and lives in a non-descript house.

Difference is one guy doesn't care about what you think of him. He just goes about his business. The other guys spends all his money to look the part of something he is not - and that's a game you can never win.

Michael Ross

P.S. I don't think your comments are idiotic.

Hi,

I just wrote and deleted a few paragraphs which boil down to "thank you very much" (and I sincerely mean it).

Best,

- Boyd

I agree with you, in regard to living beneath/below your means. However, the following is ridiculous:

> Know a guy worth about $15mil. Drives an old
> battered F150, gets around in old shorts and
> a T, does his own garden work and lives in a
> non-descript house.

I know a lot of people like this, too. But it begs the question: If you're just going to schluff around like that, then why bother hassling with getting "rich" in the first place?

I also know a lot of very wealthy people who also have the finest cars, houses, clothes and toys. Which would rather be?

Hi,

For what it's worth, if my wife and I ever get independently wealthy we'll keep living like we do now (with the exceptions that we'll upgrade our medical care and outsource more--but not all, by any means--of the grunt work).

Best,

- Boyd

You don't need to be independently wealthy to do that. You just need to focus on making an additional $20K a year.

dno
> You don't need to be independently wealthy
> to do that. You just need to focus on making
> an additional $20K a year.