How to Lose Money in Real Estate: 2006-2008

Have zero or minimal cash reserves.

Don’t be prepared for those “unexpected” expenses like a flood in your unit, a lengthy eviction, or a substantial repair.

Continue to expect 2006 - 2008 will be just like 2004 - 2006.

Real Estate goes up double digits every year. I can make huge profits without doing anything!!!!

Listen to most people in the real estate industry.

Real Estate Trade Groups, Associations, Mortgage Brokers, Title people, Agents, Brokers telling you “it’s going to pick up soon…I’m seeing an up tick in the market already.” (This is called wishful thinking).

Borrow more money.

This is especially for people that have followed #1 of this memo. Okay…so we are a little short on cash. From what I hear in #3 above, the market rebounding is just around the corner, so I’ll borrow a second Trust deed at 12% for six months to tide me over, further reducing my equity.

Refuse to Sell for Less than what you could have gotten in June 2005.

Don’t even think of issuing a counter offer or responding to the all cash offer you have received that is 85% of what you could have obtained sixteen months ago. It’s ridiculous to ever take less than what the maximum price was in the market. The broker that wrote this offer is just trying to make a commission. It’s irrelevant that this offer is three times what you paid for this property 8 years ago.

Think in the Short Term.

The market is crashing. Prices are going to fall 50%. Get out as quickly as you can no matter what it costs.