Home Builders starting to ring the dinner bell!!

General Real Estate Investing
21

An important part of being a successful investor in any market is a thorough understanding of what you are investing in and following sound principles in your investing endeavors.

Regarding leverage, it is a tool like any other tool and must be used responsibly. Leverage is indeed a “two edged sword” in that while it can boost your yields substantially if used properly and responsibly, it can wipe you out quickly if used irresponsibly.

Many new investors enter into real estate without a thorough understanding of the game or the market segment they’re working in, and they get caught up in the “get rich quick” smoke and mirrors of equity being wealth, hence they disregard many important factors regarding their investments and hence they are unknowing setting themselves up for a serious fall, and one that will take years, possibly decades to fully recover from financially.

We use leverage extensively in our business but do so carefully. We know without question the value of our investments, know where the market stands at a given time and where it may go, know how hard it will be to exit a given investment, and above all we keep a decent level of equity in our properties based on worst case scenarios to allow us to go liquid as required should things change. In general we typically have 30% to 35% equity in our investments or better, with more being the rule on more risky investments.

So, yes leverage can be a VERY BAD thing if improperly used, but it can be a VERY GOOD thing if properly used.

And one final comment. Leverage should not, in my opinion, be used to fund living expenses or consumables EVER. It should only be used for investment purposes, and always should be used responsibly. And one should NEVER come close to OVERLEVERAGING an investment based on the investment’s realistic market value (overleveraging on the acquisition price when acquired at substantially BELOW market is another matter altogether).

Happy investing!

22

With respect to stocks purchase, here is the rule of thumb: NEVER buy on speculation or prediction or rumor. ALWAYS have to do your own research, look at the facts and the valuation of the company that you are going to invest in. Investing is a long term commitment, not for short term or timing the market.

I am not a real estate investor, but I would certain that the same principle applies.

tatertot

I don't see what it matter how cheap you can buy home building companies, if they go bankrupt. Bankruptcy isn't unheard of for home building companies in a recession.

THIS IS VERY TRUE!

Regards!

23

I am not into stocks, but this pretty much reminds me of the dot com days and the dot com crash. In the mid to late 90s, everyone invested in online companies and many lost all their savings/investments.

Real Estate was such a hot topic for the last few years with inflated appreciation rates, so the stock prices may have been highly affected and got inflated. With the current market conditions and preditions that we have not hit the bottom yet, there is no telling if these shares will bounce back up, and if they did will will go back to the same prices they were when we had the real estate boom days and by when?

For the risk, wouldn’t it make sense to invest in Real Estate rather than in stocks in another company that sells real estate?

24

How is the market in San Antonio Fadi?

25

It is still ok, title company said their closing numbers went down but still good. Not much appreciation, but no depretiation which is good.

26

The appreciation here in BC is about 12% but the median home price is $450 000 (and that’s an hour and a half outside of Vancouver) It’s just nuts here. The pressure to maintain these payments are crazy. When the do do hits the fan here and it will it’ll just be another California story. That’s why we are getting out now.

27

Yeah, Fdjake, you sure sound like Petemfa. I was thinking the same thing reading your other posts.
NJRE, apparently me and you are the only ones seeing this.

28

Well, we are now officially entrenched in a long term bear market! I think that is beyond dispute. The real estate market is starting to crater and could be so deep that you won’t even be able to see the bottom. I was just looking over some stocks and Ford is at it’s lowest since 1992!!! Yes, that’s a 15 year low and we’re on the verge of a recession (best case).

WOW! 2008 is going to be an interesting year!

Mike

29

WOW! 2008 is going to be an interesting year!

This was long overdue…I love bargains…But one thing I will say when the dust clears the equity markets are going to have a nice multi-month parabolic rally…This is approaching overdone levels on the short term…( I should add I don’t own Ford or any auto makers and do not plan to buy them)

You have to be able to see through the hype and fear and step in to do some buying…I know many don’t agree but no one knows the bottom…I’m waiting for a huge down day,capitulation (high volume)…We will know when it hits,it will be the darkest day on Wall street in years and that will be the day I will buy a larger portion…This is the type of action I live for,call me crazy…I wait years for these type of conditions in the markets,real estate as well…

Unfortunately real estate and equities are very different…It’s going to be a long road to recovery for RE,and the downward slide hasn’t even really begun in RE…I think we are looking at closer to 5-7 years to burn off the massive housing inventory and repair the credit/banking situation…The RE hype needs to go away,just like the stock mania of the 90’s…People need to hate RE first…Just like when the tech bubble popped…No one wanted to hear about Cisco,Sun and JDSU…Those names brought back very painful memories,as will RE for years to come…(over inflated markets that is)

30

You bring up a very important point…

The NEWS from here on in is going to get EXTREMELY bad.
If we think sentiment is negative for stocks and real estate now, wait until 2008!

My feeling is the curtain gets pulled back this year. We are in a recession right now, that will be confirmed shortly by the data. I also think stocks get hit BIG TIME. Remember, we’re only about 1800 points off the ALL TIME high in the DOW. I personally think there’s a long way to fall here.

Remember what rookieNYC said… He waits YEARS for these opportunities. And this is EXACTLY what 2008 will be…a HUGE opportunity to buy assets for pennies on the dollar!!! Posts from guy’s like him should be a wake up call to new investors.
This is how wealth is created. When the masses are selling, the smart money is BUYING.

I bring up some negatives in my posts only as a reminder to other investors to “keep some powder dry.” I think most people here believe that this IS going to get worse before it gets better. By keeping that thought in the back of your head it helps you see and plan for the LONG HAUL. Real Estate and Stocks are long haul investments. The key to success is buying those assets when market forces become out of balance. It’s happening now with housing, it WILL happen with stocks.

As you all know I’m a buyer and owner of Ford and GM stock. I buy over a period of time and wait things out. I have no idea how low these stocks will go, but as propertymanager said, Ford is at a 15 year low. In my experience stocks that have been beaten to death don’t fall as much when a market tanks because the bad news is already priced into these stocks.
At $6/share and their worst losses behind them, (their current losses are a FRACTION of what they lost in 2006) My bet is brighter days lie ahead for American car companies. Investing like this is tough. You have to see small changes early that will make BIG difference in a companies profits. Has anyone here driven the new Chevy Malibu?? That car is exactly what American car companies NEED. GO DRIVE IT!

Mike, (propertymanager) I bet you look at a dozen homes a month.
Take 1/2 an hour and go DRIVE THIS CAR!!! It represents an INVESTMENT (GM) that your missing!! These stocks are in the TOILET, it doesn’t get any better for an investor. The Malibu has won car of the year from Motor Trend. Car and Driver headline after driving it???

WATCH OUT CAMRY!!!

My GOD, it’s like walking past a roll of hundred dollar bills and not stopping to pick them up!!
American car companies are losing money because they DO NOT have an answer for the Accord and Camry… GM does now!!! GO drive it, then tell me you don’t think this company has made a ground floor, top to bottom change in their product. Here’s a prediction that will blow you guy’s away…Wait till you see what Bob Lutz (GM head product guy) is going to do with BUICK in the next 5 years.
Remember who told you.

Ford and GM have a new contracts will the UAW which saves them BILLIONS over the next 4 years and beyond. They will no longer be responsible for retirees health care costs. (the UAW will pay those costs with a trust funded by a ONE TIME/SET DOLLAR AMOUNT payment from GM and Ford) That agreement alone has been calculated as saving Ford and GM $1500/car!

I was in the car business for years, I know what a recession does to car makers, it is THE BEST time to buy these companies. That’s a fact! They’re cyclicals, if your buying cyclical stocks you get BARGAINS when the economy sucks. It might not be the BEST way to do it, but it has worked for me for so long that I would be foolish to deviate from this method.

We are in for some very rough times unfortunately. These things happen, have happened, and will continue to happen as long as people occupy this planet. The key is RECOGNIZING these moments in time as OPPORTUNITIES. It’s not a negative thing… The daily fallout from it is… but if you have the intestinal fortitude to do the EXACT OPPOSITE of what most people are doing right now, it has been my experience that it is very hard NOT to make money during these “blow out sales!”

TODAY…FORD $5.85/share!!!

Go to CNBC and read the article about Alan Mullaly.

VERY INTERESTING!

31
You have to be able to see through the hype and fear and step in to do some buying..I know many don't agree but no one knows the bottom..I'm waiting for a *huge* down day,capitulation (high volume)..We will know when it hits,it will be the darkest day on Wall street in years and that will be the day I will buy a larger portion..This is the type of action I live for,call me crazy..I wait *years* for these type of conditions in the markets,real estate as well...

Yesterday the DOW dropped another 1.92%.

I don’t have a finger on this like I’d like to.

Does anyone use any type of email notification when there are drops that reach a certain parameter that you’ve set?

If so…do you do this thru your brokerage firm…or thru a website, (i.e. bigcharts.com).

Just looking for a free service to get email notification like this.

Thanks,
-Mike

32

If you want a good stock, buy CORN…It is used in over 50% of all the things we use and consume. Oil will come down over time… Gold will peak over $1000 within a few months most likely…

Check out CountyWide (CFC) it may have some good trading days but only good if you daytrade as you need to watch it carefully and its a cheap stock and with BOA buying it there has been some excitiment on the stock.