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Last spring, I was invited to go to Philadelphia and participate
in a "real estate bubble" discussion on Ch 8's "Money Matters
Today." Television reporters, newspapers, and media hype love
scaring you to grab your attention. On the TV show, I defended
the real estate market.
What's behind all this bubble talk?
Before you give any substance to warnings about a "real estate
bubble," look closely at the source. Many stock brokers jump on
the bandwagon of real estate doom to get investors back into the
stock market. Also, many negative reports originate from
mortgage lenders who want to keep the mortgage insurance rates
high and keep the insurance premiums coming in for loans on
houses that have appreciated.
So, what happened to the real estate bubble in 2005?
I can't speak for all real estate investors. If my family had
been scared into discounting our investments, selling out, and
not buying more property in 2005, we would have lost a million
dollars. We bought and held houses. All of our property
increased by 20% - 35% and the ones we fixed increased in value
even more. In particular, for one home we paid $120,000 and
spent $10,000 in repairs - within the year it appraised for
$325,000.
Who profits from the real estate bubble?
Besides media scaremongers, mortgage insurance providers, and
stock brokers, real estate investors make even more money.
What's that? How do real estate investors make money from the
real estate bubble? They take advantage of desperate home
sellers scared by the media.
In January 2006, we bought an investment property that the home
seller, in the midst of a divorce, discounted for a quick sale.
The $340,000 property appraised for fifty thousand more than the
purchase price. Now, we could quick sale the property for fast
cash, but we're in for the long haul. The property has great
development potential. So, we'll let the tenants pay for the
mortgage and maybe tear the small house down in a few years. A
half acre, one lot away from a future marina near new condos,
has many possibilities.
Keep the bubble talk. People always need housing. The more you
hear about the pending burst, the more money real estate
investors CAN make.
