Tuesday, May 23, 2006

Housing Bubble Ready to pop? Not for me!

I had a revelation today and it is really simple. For those of you in real estate for the investment of it, whether you flip, buy and hold, get cash flow or a combination of the two I have some advise for you. In Real Estate as in life you have two choices.

A. You can wait for the RE market to correct itself.


B. You can increase your income and correct the RE market.

Ask John Mackey how much his life would change if gas went to $7 a gallon. Ask Angelo Mozilo, if he takes his kids to the movies only on matinee times. Do you think that if Toll Brothers sold their homes for 1.67 million instead of 1.71, their bottom line will be in the red?

My advice to you is learn to earn more and "mass media econmoic concerns" will not concern you. Sometimes the most basic concepts are the hardest ones to grasp!


Hakim said...

I dont get your point. Are you saying being long RE is safe because people will earn more? (perhaps via sudden wage inflation and stable RE prices?)

El Train said...


What I am saying in this post is, not everyone invest in real estate with the "poorman" mentality. Dont get me wrong, starting from the bottom is novel and can work,

however if one's annual salary is 3 million dollars, and that person goes out and purchases a 1.5 million apartment building with cash, if the unit is not 100% occupied its not the end of the world. All collected rents/cash, minus expenses and taxes is cash flow. No debt service exist.

If the market goes up, they are happy, if it goes down, it does not sting as all land value increases over time.

Finally, not all great investments have cash flow. My point is dont turn these away because dont cash flow, increase your other sources to open your eyes to all investments not just the duplex that rents for $1000 a month and is being sold for $25,000.

Javier Marti said...

You are perfectly right. I have 2 properties in a market "correcting" right now, and I am focusing on increasing my income, instead of worrying about it.
RE investment is for the long term, and in the long term /if we are not dead by then/ RE generally increases its value