Real Estate Made Easy: When the bubble bursts, deals will blossom By Mike Summey
Robert Smith and Associates
July 19, 2006
There is increasing concern about there being a bubble in the real estate market and what might happen when it bursts. As a seasoned long term investor who bought my first investment property in 1972, (Still own it by the way, along with every other one I’ve bought since.) I’ll echo George Bush’s infamous line, “Bring it on!”
Yes, there is a bubble in the real estate market, which has been brought on in part by the extremely low interest rates of the past few years coupled with a rash of amateurs trying to become real estate investors. The result has been too much money chasing too few good deals. Let me explain!
First, let’s discuss the impact of the low interest rates. Back when 30 year mortgage rates were running around nine percent, the payment on a $100,000 mortgage was about $805 per month. When rates fell to the four percent range, the same payment amount would cover a $168,500 mortgage.
Now picture this, someone accustomed to making a monthly house payment of $805 suddenly realizes that he or she can live in a much more expensive home without it costing any more money, what is he or she likely to do? Start looking for a more expensive home, right? In addition to this, many people who could not qualify for a loan when rates were at nine percent now do and they represent a whole new class of buyers that weren’t in the market before.
I realize that my example only addresses one small segment of the real estate market, that being basic starter homes to mid priced homes based on differing geographic areas of the country. But you can expand the concept to cover all types of real estate investments. The bottom line is that when rates fall, the same payment will cover larger and larger loans, thereby creating new buyers and giving previously qualified buyers more money with which to buy. This creates competition for existing properties, which pushes up prices and encourages construction of new and more expensive properties.
Sticking with our above example, if rates go back to nine percent, what happens to the homeowner who bought a new home, financed $168,500 at four percent for 30 years and is paying $805 per month? Here’s what! In order to sell the home, they would have to find a buyer who could qualify for a monthly payment of $1355 in order to finance the same amount on the house. Believe me, there are thousands more buyers who could qualify for an $805 monthly payment than there are ones who can qualify for a $1355 payment. This reduces competition and makes properties harder to sell. Voila! The bubble bursts!
So you say, “Why not just wait and don’t sell until the rates come back down?” Well, what if you’re transferred on you job, lose your job, get divorced, retire and don’t want such a big house, get sick, have an accident or any of the dozens of other reasons that cause people to have to sell their homes, what are you going to do then? The bubble has burst, the buyers aren’t there and you’re faced with having to sell for less to avoid the risk of foreclosure and the destruction of your credit. Not a pleasant thought, but it happens every day in every market in America.
Now, let’s couple this scenario with the rash of new want to be investors that a real estate boom creates. Aren’t you amazed by the number of real estate gurus that seem to pop up when times are good? There is a rash of new television infomercials and a seemingly endless number of experts telling you how easy it is to get rich with real estate. All this activity produces thousands of want to be investors, often with more money than sense, who chase after every deal and bid the price up well beyond what a seasoned investor like me is willing to pay.
Enter patience; the real key to building wealth with real estate. I’ve been through several of these boom and bust cycles in my more that 30 years as an investor. I’ve had years when I would only buy one or two properties and other years when I’ve bought as many as sixty five. As Kenny Rogers sang in his hit song The Gambler, “You’ve got to know when to hold ‘em and know when to fold ‘em.”
That’s why I referred earlier to George Bush’s “Bring it on!” comment. It’s when the bubble bursts that professional investors make the most money. We know that if we get into the frenzy a bunch of novice want-to-be investors create, we will lose. We understand that the real estate market is cyclical and that common sense always rules over hype and emotion. We know that making a sure million is better than risking it all to make three million.
The natural tendency of real estate investment club members is to want it now. They’re exposed to all the hype provided by a procession of get-rich-quick gurus who convince them that they can build wealth and become wealthy with very little effort. It’s sort of like lottery winners going on a speaking tour telling everyone that they won the lottery and you can too.
Each year at the few seminars I conduct, I show participants how to truly build wealth with real estate. Some are surprised to learn that becoming wealthy the Weekend Millionaire way is not a get-rich-quick proposition, but rather a secure investment strategy that average working people can do without risking the security of their day jobs. In these seminars, I share the techniques and strategies that have allowed me to retire at age fifty with a growing seven figure passive income from real estate investments. No hype, no gimmicks, just plain common sense principles that when followed yield a better life and a bright financial future for those who follow them.
As we approach the coming slowdown in the real estate market, or if you want to refer to it as “when the bubble bursts,” there will be tremendous opportunities for those following the Weekend Millionaire real estate investing strategy. We flourish when speculators struggle. The inevitable losses that will be suffered by those who paid too much during the boom period will create tremendous opportunities for people like me who follow sensible investment principles and don’t succumb to temptations of a hyper inflated market. Over more than 30 years, my best buying years have been the ones following boom periods like the one we have just experienced.
Yes, there is currently a bubble in the real estate market and when it bursts, deals will blossom. Hundreds of thousands of people have bought into speculative real estate investment strategies over the past several years. As interest rates rise, market conditions will change and amateur investors who rode the wave of real estate ecstasy will suffer some rude and possibly devastating financial awakenings. On the other hand, seasoned investors weren’t caught up in this euphoria and they stayed the course of sensible investing; as a result, they are about to find themselves awash in opportunities.
If you want to retire early with a safe and sound financial future; if you want to build a nest egg to secure your family’s future, I don’t think you can find a better way to do so than by investing in real estate the Weekend Millionaire way. The choice is yours; you can chase rainbows or realize that the pot of gold is filled only by making sound investment decisions and being patient. The Weekend Millionaire way works all the time; through boom or bust cycles, it always works. What changes is the number of deals that are available at any given time. Happy investing!
For more information visit http://nightingale.com/p~Product~Real_Estate_Investing_Program.asp
Yes, there is a bubble in the real estate market, which has been brought on in part by the extremely low interest rates of the past few years coupled with a rash of amateurs trying to become real estate investors. The result has been too much money chasing too few good deals. Let me explain!
First, let’s discuss the impact of the low interest rates. Back when 30 year mortgage rates were running around nine percent, the payment on a $100,000 mortgage was about $805 per month. When rates fell to the four percent range, the same payment amount would cover a $168,500 mortgage.
Now picture this, someone accustomed to making a monthly house payment of $805 suddenly realizes that he or she can live in a much more expensive home without it costing any more money, what is he or she likely to do? Start looking for a more expensive home, right? In addition to this, many people who could not qualify for a loan when rates were at nine percent now do and they represent a whole new class of buyers that weren’t in the market before.
I realize that my example only addresses one small segment of the real estate market, that being basic starter homes to mid priced homes based on differing geographic areas of the country. But you can expand the concept to cover all types of real estate investments. The bottom line is that when rates fall, the same payment will cover larger and larger loans, thereby creating new buyers and giving previously qualified buyers more money with which to buy. This creates competition for existing properties, which pushes up prices and encourages construction of new and more expensive properties.
Sticking with our above example, if rates go back to nine percent, what happens to the homeowner who bought a new home, financed $168,500 at four percent for 30 years and is paying $805 per month? Here’s what! In order to sell the home, they would have to find a buyer who could qualify for a monthly payment of $1355 in order to finance the same amount on the house. Believe me, there are thousands more buyers who could qualify for an $805 monthly payment than there are ones who can qualify for a $1355 payment. This reduces competition and makes properties harder to sell. Voila! The bubble bursts!
So you say, “Why not just wait and don’t sell until the rates come back down?” Well, what if you’re transferred on you job, lose your job, get divorced, retire and don’t want such a big house, get sick, have an accident or any of the dozens of other reasons that cause people to have to sell their homes, what are you going to do then? The bubble has burst, the buyers aren’t there and you’re faced with having to sell for less to avoid the risk of foreclosure and the destruction of your credit. Not a pleasant thought, but it happens every day in every market in America.
Now, let’s couple this scenario with the rash of new want to be investors that a real estate boom creates. Aren’t you amazed by the number of real estate gurus that seem to pop up when times are good? There is a rash of new television infomercials and a seemingly endless number of experts telling you how easy it is to get rich with real estate. All this activity produces thousands of want to be investors, often with more money than sense, who chase after every deal and bid the price up well beyond what a seasoned investor like me is willing to pay.
Enter patience; the real key to building wealth with real estate. I’ve been through several of these boom and bust cycles in my more that 30 years as an investor. I’ve had years when I would only buy one or two properties and other years when I’ve bought as many as sixty five. As Kenny Rogers sang in his hit song The Gambler, “You’ve got to know when to hold ‘em and know when to fold ‘em.”
That’s why I referred earlier to George Bush’s “Bring it on!” comment. It’s when the bubble bursts that professional investors make the most money. We know that if we get into the frenzy a bunch of novice want-to-be investors create, we will lose. We understand that the real estate market is cyclical and that common sense always rules over hype and emotion. We know that making a sure million is better than risking it all to make three million.
The natural tendency of real estate investment club members is to want it now. They’re exposed to all the hype provided by a procession of get-rich-quick gurus who convince them that they can build wealth and become wealthy with very little effort. It’s sort of like lottery winners going on a speaking tour telling everyone that they won the lottery and you can too.
Each year at the few seminars I conduct, I show participants how to truly build wealth with real estate. Some are surprised to learn that becoming wealthy the Weekend Millionaire way is not a get-rich-quick proposition, but rather a secure investment strategy that average working people can do without risking the security of their day jobs. In these seminars, I share the techniques and strategies that have allowed me to retire at age fifty with a growing seven figure passive income from real estate investments. No hype, no gimmicks, just plain common sense principles that when followed yield a better life and a bright financial future for those who follow them.
As we approach the coming slowdown in the real estate market, or if you want to refer to it as “when the bubble bursts,” there will be tremendous opportunities for those following the Weekend Millionaire real estate investing strategy. We flourish when speculators struggle. The inevitable losses that will be suffered by those who paid too much during the boom period will create tremendous opportunities for people like me who follow sensible investment principles and don’t succumb to temptations of a hyper inflated market. Over more than 30 years, my best buying years have been the ones following boom periods like the one we have just experienced.
Yes, there is currently a bubble in the real estate market and when it bursts, deals will blossom. Hundreds of thousands of people have bought into speculative real estate investment strategies over the past several years. As interest rates rise, market conditions will change and amateur investors who rode the wave of real estate ecstasy will suffer some rude and possibly devastating financial awakenings. On the other hand, seasoned investors weren’t caught up in this euphoria and they stayed the course of sensible investing; as a result, they are about to find themselves awash in opportunities.
If you want to retire early with a safe and sound financial future; if you want to build a nest egg to secure your family’s future, I don’t think you can find a better way to do so than by investing in real estate the Weekend Millionaire way. The choice is yours; you can chase rainbows or realize that the pot of gold is filled only by making sound investment decisions and being patient. The Weekend Millionaire way works all the time; through boom or bust cycles, it always works. What changes is the number of deals that are available at any given time. Happy investing!
For more information visit http://nightingale.com/p~Product~Real_Estate_Investing_Program.asp
Print
Email
