Your Questions Part 2
Posted on August 31, 2006 - Filed Under Housing |
This is a continuation of yesterday’s article.
Engineer X: Does the demotion of Pluto from its status as a planet
make you feel
less secure about our own position in the solar system? What steps, if
any, should we take to retain our position?
Clifford: The demotion of
Pluto was actually a smoke-screen to divert our attention away from the real story: The dismissal of Tom
"I’m a freak" Cruise’ from Paramount Studios. The secret
group of men that control the entire world realized that the story of
Tom Cruise could disrupt millions of people who follow that Hollywood
junk with almost a cult-like fascination. One suggestion to divert our attention: Get rid of
Pluto.
I personally feel that Pluto did not deserve to be tossed to the
wolves, discarded like an old banana peel. Pluto has always been the
underdog of the planets; it has even had a Disney character named after it. Most children can’t tell you half of the names of
the planets but they always remember the fun one: Uncle Pluto. Pluto and Uranus.
Engineer X: Compare and contrast the early ’90s collapse of the Southern
California Real Estate market, and its subsequent comeback, with the
situation that exists today.
Clifford: Nice choice of words there "collapse". Maybe I should
refer to you as "Journalist X" from now on. All kidding aside, I would
be blind if I didn’t acknowledge that there are similarities between
what happened to the housing market in the early 90’s versus what is
happening today.
First off, I see that there are more "flippers" today than there
were back in the early 90’s. With the popularity of shows such as
"Flip this House", almost anyone has realized that they can buy a home,
fix it up and sell it all within a matter of weeks. This works great in an up market. But when the market slows down as it is now? A decent portion of
what we are seeing on the market these days are these houses that are
being flipped. These are, what Kiyosaki refers to as, speculators.
And these are the people that are going to lose their shirts. This is
at a nationwide level.
In Southern California, we’re not seeing 30% price increases
anymore. Inventory is at record levels. Houses aren’t selling in 30 minutes: morelike 46 days. Those that are
priced to sell are obviously moving quickly. Those that believe that
they are entitled to 30% increase from last year are the ones that are
sitting and waiting.
In my specific area of interest, Long Beach and Signal Hill, there are still many great deals out there. Long Beach is going through a gentrification process. So far, it’s at the cusp of 7th street making it’s way to the 405 freeway. This area provides plenty of opportunities for those that know how to invest.
Overall, I’m optimistic about this market. Sellers realize that they have to up their game if they are going to sell. One aspect: Sellers are paying all (or most) of the closing costs. I’ve seen some houses sold at a loss, just to let the seller out from underneath a huge mortgage. Factors such as these are going to favor buyers and hurt sellers. In other words, it’s a buyers market. People can shop, compare and take their time. A year ago, this wasn’t the case. For those of us that follow Kiyosaki, this should be a grand time. After all he states that money is made when the property is bought, not sold.
Anyone getting into
real estate now should consider holding long term. With prices doubling every 7 to 10 years, why wouldn’t you? And believe it or
nuts, this is exactly what Kiyosaki teaches in his Rich Dad books. Purchase property, rent it out and hold onto it.
If you liked that post, then try these...
Sight Seeing on May 7th, 2005
I spent the afternoon with my friend, looking at the investment properties that the Real Estate Agent had given me.
Failure to Communicate on April 16th, 2005
I decided to take control of the situation again.
Comments
6 Responses to “Your Questions Part 2”
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“Anyone getting into real estate now should consider holding long term. With prices doubling every 7 to 10 years, why wouldn’t you? And believe it or nuts, this is exactly what Kiyosaki teaches in his Rich Dad books. Purchase property, rent it out and hold onto it.”
But you are planning on selling right away? Do you think you will get a good price compared to what you paid, plus the renovations (maybe we can ignore any other costs net of rent from the tenant as you got live there in the meantime).
Moom, this is an excellent question. I have a post, talking about this, that I’m currently working on. I have a few other articles to get out first. I’ll talk about this next Wednesday.
Pluto’s demotion a smoke screen? Hmmm, may Karl Rove arranged for this and the John Mark Karr thing to take the news away from the war. . . .brilliant.
So, you’re prediciting that the quick flippers are doomed in the short term, but isn’t that what you’re trying to do right now? And aren’t you planning to do very much the same thing as soon as your place sells? Did I misunderstand what you wrote, or is Signal Hill/LBC immune from the problems facing other flippers? I’m not trying to bag on you. I hope you do well, but I just wanted some clarification. Thx.
You should never feel that you’re bagging on me by asking questions, Old bean. I’ll have to answer your questions in another post. I find this comment section just a bit too confining for an explanation.
I love questions!
Question:
With the housing market headed “south” so fast, have you had to reconsider your selling strategy; and if so, what impact will it have on your potential profit?
Thanks
Hello Stan!
While I don’t agree with your characterization of the market “heading south”, the only point on selling that has changed is the length of time.
In the good old days (last year) houses were being sold in minutes. Today, on average, its 42 days. I’m mentally prepared for 6 months.
With that being said, the longer I hang onto the houses the less my profit. If they don’t sell in 6 months then I will definitely rent both of them out and move onto the next project. As it stands now, I could almost break even on rent and this would help my overall profitability.