The Reality of Real Estate

"The real estate bubble is going to burst!" Those words have been burning my ears since the first day I heard them on the radio driving to work. My wife and I had been dreaming of the day that we could both stay at home and look for properties in the classifieds over coffee. The infomercials and cd's telling of "no money down" and "buy 'em, fix 'em, flip 'em" were hypnotizing us. Only one more investment and we too would be "living the life we've always dreamed of". Well not just yet. Sadly the market, much as it was predicted, has gone into a downward spiral. How could this have happened?

We began innocently, taking a part of our savings to invest in a summer rental at the Jersey shore. We found a one bedroom condo that needed TLC. It didn't require much to get it ready and we could ask enough to cover our mortgage payment. However, our timing was bad. The renovations were completed in June and rental inquiries by then were zero. To avoid the burden of paying 2 mortgages, we decided to list. The unit sold in 30 days for 20k more than we invested. WOW! What if we could do that again? and again? getting bigger properties and higher returns each time? It seemed too good to be true. It would require an unforgiving commitment of time to complete the process, but we began moving 2-3 properties a year - flips, rentals, you name it, and it was worth it.

I am no finance expert. In fact my day job is in sales. I do believe, however, that humans have a natural inclination to do what they are told, particularly when it comes to self-preservation. When the presses started rolling a few years back about the looming real estate market crash, would-be buyers quickly zipped-up their pocketbooks. No one with a low threshold for risk would dare enter into that chasm. The adjustable rate mortgage was perhaps too good. The interest rates maybe dipped too low. The market was at a fever pitch. And "everything that goes up," according to my well-educated real estate advisor "must come down." He said "it's all part of the market cycle."