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Page 3 of 3
Alligator Wrestling
Several
times last year I warned real estate investors that it was a good time to
sell as that market was showing signs of topping out. I was speaking to
those buyers who bought for price appreciation rather than long term income.
Speculators versus investors. You may have noticed that there has been a lot
of speculating in real estate the past few years.
Perhaps I’m
making too obvious a point by saying that a market top is what comes right
before a decline, but in real estate, where illiquidity is always a problem
and mortgage lenders who insist on being paid regularly magnify market risk,
market declines can become a big deal. In liquid markets like the bond or
stock markets, bad trades can be walked away from in minutes. With real
estate, if you have a stinker, the smell can linger for a long time.
Author Robert
Kiyosaki has been a friend of mine for about ten years now. About two years
ago Robert told me that his book, Rich Dad, Poor Dad, is now
published in 37 languages and on some days he sells 1 million books a day.
Now that is successful! I wish I’d held out for a royalty, rather
than just a mention in the book.
Robert is also
a real estate expert, having cut his teeth on aggressive real estate deals
and flipping more than a few properties for quick profits in his day. In a
recent article, he mentioned what a great real estate market this is
becoming. This slant sounds quite different from all the warnings, from me
and others, over the past year or so about the end of the real estate boom
because Kiyosaki is writing from the perspective of a real estate investor,
not a real estate speculator. For investors (those who buy for long term
income potential), sellers who are eager, even desperate, to sell – a far
cry from what we have seen for the past few years – are the raw material of
good deals.
Robert often
uses the term alligator to describe real estate with negative cash flows.
You have to keep feeding it and feeding it, and it has the potential to eat
you if you don’t feed it fast enough.
Until I read
Robert’s recent article on real estate, little did I know that by
forecasting a real estate downturn I was spreading good news – good news for
real investors, but bad news for amateur alligator wrestlers.
Nationally recognized authority on investment
management.
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Will Hepburn is a well known expert on investment analysis and portfolio
management. In addition top publishing the Financial Markets Update, Mr.
Hepburn is president of Hepburn Capital Management, LLC, a Registered
Investment Advisor, and is known as The Interest Rate Guy™ for his analysis
of the bond and mortgage markets.
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