“And, The Debate Goes On”: To Invest Or Not To Invest In An Upside Down Real Estate World


In the 60s, Sonny & Cher (before Sonny crashed into a tree while skiing) had a big hit with the song “And The Beat Goes On”–or something like that. Now, in real estate, 2008, a good song title might be “And The Debate Goes On!”

The “debate” is whether or not this is or isn’t a good time to invest in real estate. There are those who argue that real estate is always a good investment (see “Gone With The Wind” Chapter 6, page 147, paragraph 4, sentence 7, Scarlett’s dad to Scarlett : “There is always the land, Scarlett.”) And, as we know, in the end, it was the land that Scarlett returned to after the South got the s–t kicked out of it by the North (okay, I’m from New York, so I am partial to this version of reality..which happens also to be …well…reality!)

Now, the cool thing about fictional characters is–they are fictional. They don’t really have to feed their families or save for retirement or worry about paying for their kids’ education. Heck, all Scarlett had to do was hope that Rhett would come back one day and wisk her away to an even better chunk of real estate.

Time To Get Real. This Ain’t No Novel

That’s right. This is the real world. No authors to help us along our way by dreaming up another chapter or another character to save the day.

In the real world, a bad investment–and, yes, there is a Santa and, yes, there are real bad real estate deals–can actually hurt you. The point being, if you are going to invest in real estate in the current climate, you had better do your homework and know what you are up against.

The economic picture is bleak and seemingly getting bleaker each day.

Just this week, The National Association of Realtors said sales of existing single-family homes tumbled last month by 2 percent,while the median price of a home declined 7.7 percent from a year before.

Yes, there are pockets in the country where this is not the case. But, that is the exception and most certainly not the rule.

What began as a subprime mortgage crisis has ignited an economic fire burning around the world and devastating all sorts of different businesses…from banks, to brokers, to airlines (three of the biggest U.S. airlines this week reported large quarterly losses pegged to soaring fuel costs), to automakers, to newspapers, to broadcasting, to resorts, to …..well, you get the idea.

No one…no one…really knows where this recessionary train is taking us and how many stops there might be till we get to the terminal?

Conventional wisdom…not so wise

The “conventional wisdom” is to buy real estate when there are bargins to be had. And, under normal times, this makes total sense. But, the point is—these are far from “normal” times.

When times are not “normal”–so-called conventional wisdom gets tossed out the window.

This is not to say that no one should invest in real estate at this time. Someone has to. But, as I said before, this is NOT the time to learn on the job.

About Author

Charles is currently reporting for KNX Radio in Los Angeles, is the co-author of the book No Time To Think, and can be found commenting about the news on his blog, The Feldman Blog, as well as on The Huffington Post.


  1. Real Estate Advocate on

    The problem with this market isn’t to decide whether this is the right time to invest or not to invest. We all know this is a buyer’s market and we all know that it’s time to buy.

    The real problem is that in today’s mortgage market it’s very difficult to buy for all but the most creative and most well heeled investor.

    This is the greatest buying opportunity ever but we as investors can’t buy because we can’t get any reasonable funding for our deals. It’s like being given the keys to the candy store only to find out that you’re a diabetic.

    I personally would love to buy a hundred houses at fifty cents on the dollar right now but it’s simply not possible. To be a successful investor today you MUST have cash – huge amounts of cash.

    Here’s the problem if you don’t have at least $100,000 in disposable cash:

    Firstly, no money down loans, stated income and multiple purchase loans have dissapeared for the average investor.

    This means you need to put 20% down on your deals. That’s $40,000 on a $200,000 house plus an additional $20,000 that you need to show as reserves in order to get the loan. Put simply you need $60,000 in cash just to buy a $200,000 house.

    With $100,000 in cash you can only buy 2 houses. That hurts.

    Secondly, once you buy the property you have no option but to hold it. The flipping days are dead for now. In order to hold the property you usually need substantial cash to cover negative cash flow, vacancies and living expenses (if you have no other source of income). How many properties can you afford to carry?

    The end result is that all the investors I know can’t buy any more houses. Most of them are lucky to escape from their current investment hell of owning properties that they can’t sell and no longer can afford to hold.

    The good news is that the opportunity always lies in the obstacle. The obstacle is that there’s no reasonable finance available for investors. The opportunity is to do creative deals that don’t require finance or partner with a money guy.

  2. you just proved my point….this is NOT the time for someone to first learn on the job, so to speak. If you are not already an “expert” on real estate investing, best to sit it out a bit till things change for the better….we hope!

  3. Pingback: And, The Debate Goes On: To Invest Or Not To Invest In An Upside Down Real Estate World | The Long List of Odysseus Medal Nominees | Realtors and real estate, mortgages, lending, investments

  4. It’s a very good and valid point Charles.

    New investors need to be extremely careful when they invest in this market. They need to be very selective about their investments.

    Some Don’ts …
    Don’t do fix and flips (leave this for the pros)
    Don’t buy anything is a depreciating area with high foreclosure rates etc … rather wait for these areas to bottom out.
    Don’t invest in any negative cashflow deals. This limits you to a $180K ceiling.

    Some Does …
    Do assign or birddog deals (instead of buying and flipping)
    Do a maximum of 3 buy and holds in your name
    Do creative deals like subject to, wrap mortgage and lease option purchases BUT ONLY if they cashflow.
    Do partner with an experienced investor.

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