Friday, June 08, 2007

How big is the Real Estate bandwagon?

Just got this in my email from my friend Doug:

Hey Lee,

I know you have at least a passing interest in watching the going-on's in real estate. I thought you might find this story somewhat amusing (especially since real estate has excelled at providing entertainment in recent months).

I was talking to a couple I know, about three, four weeks ago. Since I work in the area of real estate investing, I have more than my share of real estate and\or investing conversations. They were excitedly telling me about how they were getting into flipping properties. A friend of theirs had successfully flipped a few properties in SoCal, two, three years ago (back when "any idiot" could make money doing it) and had quit her job (read: lost) to commit to it full-time. This friend has been "living off of her profits" for the last couple years (read: moved back home with mom and dad) and has been scouring the nation since, for the next area of opportunity.

She finally found the land of opportunity, a place where one can buy properties for a tenth of what you would pay in SoCal. A place known to many; Detroit. [sidebar: now you and I have a pretty good picture of the story with Detroit, what with so many of the posters on a particular weight-training board being residents of the area. But even without knowing anyone in the area, the news\internet offers quite a bit of information. The problems of the auto industry has burden the economy there and houses are staying on the market so long, some are just being abandoned.]. I recently recall seeing an article about RE in Detroit. One of the comments about the incredibly low price of a recent transaction was "...You can't buy a used car for that."

They offered to let me invest along side of them and their friend. I begrudgingly explained I was already tied up in a number of RE deals.

So do I think that all of the good RE deals are gone? No, I think there are still good deals out there, one just has to understand where to look. For instance, this couple tells me they're taking their remaining equity out of their place to invest. Their original loan was subprime, due to her working on commission only and he not having a job at the time. So they've decided to pile on top of that, hoping their Detroit investments can help them cover the loans on their place. I'll be keeping an eye on their place, in case it comes on the market.

Doug's friend is either an idiot or a visionary. Time will tell.

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Flatland Pastor said...

"Fools" and "their money" - easily and often parted, frequently due to the naivety of the aforementioned "Fools".

Another day and the wheel goes 'round while P.T. Barnum chuckles softly to himself.

*Coming soon - but not soon enough for some.*

Shaf said...

Flipping a house in Detroit is like this:

1. Buy house.
2. Watch owners dance with joy that they got out owing $35K
3. Fix up house.
4. Deal with snickering realtors
5. Pay off mortgage after 30 years.