Hurry! Liquidate All of Your Real Estate Investments While You Still Have Negative Equity!

Tuesday, January 5, 2010 , Posted by Johnny Fuery at 4:22 PM

Originally Published 2007-09-20 21:14:22

I get at least one email per week that more or less asks, "are you worried about the housing market crash?" These are usually subtle, like a link that send me to yet another site telling me how dumb I am to invest in real estate with "have you seen this?" in the subject line, but they're all asking the same question.

The answer is, yes, I'm worried. Times have been pretty tough for about a year, and the higher interest payments are making the frugal side of me cringe. It's a pretty scary thought to realize that I'm losing more every month on paper than I've ever made working a day job. And then some.

Yes, that's right. I've done the math, and it isn't pretty.

But here's a little reminder.

You didn't get into this game because you were hoping to flip your place in three months and make a quick profit. Did you? Then well, you might be one of those "accidental landlords". In which case, start asking questions. You'll need the help. And by the way, that strategy, at best, is akin to looking for a new job with a higher salary. At worst, just go to Vegas. You'll lose less.

No, you got into this game because you believe in the long term value of leverage. You looked at your mom's house that was purchased back in 1977 for half of what you make in a year and is now bigger than her pension plan, and thought, "hey, if she just bought two, I could've gone to an Ivy League!"

Well, I'm here to tell you something that a fellow real estate investor said to me a couple of years back: the hardest part is holding on to it. I'm pretty sure he was talking about times like this. When two tenants call at the same time, when two more are late on their rent, when you just gave up your day job, and when you've already tapped some of your reserve credit lines. When you can't open a newspaper without the term "housing meltdown" jump out at you and a bulletin about some bank you owe a million bucks to that might be going down the tubes. And you're reading People Magazine, not the Wall Street Journal!

Don't fret. This too shall pass. Keep at it, work your business, and don't sweat the hundreds of thousands of dollars you just "lost". You never had it in the first place anyway. It's not real money until it changes your lifestyle.

This is a long term game. Stay the course, and five years from now, you'll be quietly laughing at the guys who swore off real estate forever and are bragging about the $35K tucked away in a 401K.

I know it's scary. But the fundamentals haven't changed. If it was a good investment at $600K, it's a great one at $500K. Make your payments, restructure where you can, and remember that, even worst case, inflation will save you. It only hurts in the short term.


On 2007-09-21 06:02:19 Desty said:
Something I read about real estate that makes total sense: You make your profit when you buy, not when you sell. Don't buy something that's at an average price and hope that it increases. Buy something at a lower price, on sale if you will, and even if you can just get the average price, you've still made a profit.

On 2007-11-14 14:07:17 Rick Marnon, Howell said:
I agree with this. I am starting to do the same thing. I have an offer in on a house that is worth $700k and I am hoping to get it at $450k. Great long term investment, but not immediate. I will be buying up quite a few rentals in the near future to create a passive income for my early retirement.

Rick Marnon, Howell

On 2008-01-10 20:47:21 Kenric said:
Make sure you have positive or at least break even cashflow too! Then you can weather any storm.

On 2008-01-11 19:33:45 Portland Real Estate said:
This might not be the best time. I think its a good Idea to rent. Rental market is super hot right now. This is actually a time when investors are trying to find deals. my 2 cents

On 2009-07-08 10:41:26 Panama Land Investments said:
"You make your profit when you buy, not when you sell.

As true as it will ever be. Right now is the time to get wealthy- look at Warren Buffet, not necessarily real estate but he is buying EVERYTHING

On 2009-10-14 10:45:19 Aspect Investments said:
I know this is an old post but there was real panic around in 2007 and rightly so. I think we can now see the wood for the trees and anyone that could afford to hold onto their investments can see light at the end of the tunnel.

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