The Bubble

[acoolmariner]

Dave T,

The question, implying a National Bubble or not, still goes unanswered by so many of you, obviously, intelligent people. Instead of simply saying "I, personally, don't believe in the bubble, but if you're interested in other investments, try such and such, or this and that", or, and this is even simpler, saying nothing at all, you leap to the nearest soap box and pontificate about the "OUTRAGEOUSNESS OF SUCH A NOTION!!!!" I am sorry, gentleman, that I asked the question in a way that stuck such a big thorn in your paws. It seems like a touchy subject  ???, perhaps that's reason enough for me to look at it with a bit more scrutiny. Most of you seem a bit more concerned about this than you'd like to admit. If so many are willing to "smack the little baby seal on the back of the head...WHAP! with a lead filled snow shoe"(-frank zappa) for asking a question, perhaps this IS the wrong place for me. National bubble, local bubble...you're going to chastise me over semantics? What next....Spelling? But please, don't answer the question. I don't think I can take any more. But, isn't this where so many say to go if you need to know the answers? What motivation can you think of that could possibly force me to do that again. Still, I apologize for bringing up such a taboo subject with so many. Those of you who actually read and understood the question...I thank you for your observations and advice. The rest?.....well,.........rail on.
 8) 8)

[Dave T]

mariner,

You're right, you are on the wrong website to ask about investing in something other than real estate.  If you go back in this thread, you will see that I did give you a serious answer -- do what Warren Buffett is doing, which is buying cash right now.

My previous response in this thread only disputed nirvamd who implied that there must be a national bubble because his market is in one.

[acoolmariner]

Dave T,

No Dave, that's not what you said. You were citing the "Original Question" as you put it. You finally did address the real question, but that's all. Is there anything in the rules that say I can't ask for opinions from other RE investors regarding additional choices? I'm asking other RE investors about additional choices in investments. Perhaps something RE related that I haven't thought about. This is out of the scope of this website? I don't understand why anyone would take such an issue with this. You sound like a traffic cop. How about we all go back to talking about the thing we all love to do and quit whacking the baby seal. 'niravmd' and 'ckj' put out some really good information and I "tanks yous two fuh dat!"  8) 8)

[Dave T]

Since you ask, here is the rule.

The discussion forums are intended ONLY for asking and answering INFORMATIONAL questions SPECIFICALLY related to real estate investing.[/list]
Here is the link if you want to check it out for yourself.  
http://www.reiclub.com/forums/index.php?board=29;action=display;threadid=1187

[acoolmariner]

Oh Dave!  8) 8). Don't be like that. I'm sorry this crushes you so badly. I can't wait to see your next post....really!!!

[acoolmariner]

Dave T,

I'm asking other RE investors about additional choices in investments. Perhaps something RE related that I haven't thought about.

[Las Vegas Real Estate]

history has shown the stock market has bubbles that will burst. The real estate market is a steady clime that dips from time to time.

[Roger J]

mariner,

You're right.  Some people here must not have read your post correctly.  Unfortunately, one of those people seem to be you.  You asked for input from your fellow investors, and you got replies from some of the most experienced, knowledgeable, and respected investors on this site.  And you responded to them by berating them like a 12 year old child.  If you're going to ask the question, be prepared for the answer.  It isn't always going to be the one you want to hear.

I thought that your post was answered quite well.  Several times over, in fact.  Somehow, you seemed to have missed that, though.

Let's break this down and end this now, shall we?

In one of your posts you said, "The question I posed had nothing to do with acceptance of a theory."  But wait.  In your original post you said, "I'd like some input from as many of my fellow investors as possible on the question of the "Bubble". "  Reading this statement, along with the rest of your initial post, a reasonably intelligent person might assume that not only did you post a question about the acceptance of that theory but that you also wanted to discuss it.  No one that responded seem to stand on a soap box, get their paws stuck, or smack the baby seal on the back of the head.  We merely said that we didn't believe in the existance of a National housing market bubble.   Finally here, further on, you said, "The question, implying a National Bubble or not, still goes unanswered by so many of you..."  Well, I think that that was answered quite well by many of us.  But from your postings, it appears as if you're unsure if you even asked the question.  If it hasn't been answered to your satisfaction, please tell me what exactly is missing?

In another line, while replying to Dave T, you say, "National bubble, local bubble...you're going to chastise me over semantics?"

Well, yes, I guess we are.  There is a BIG difference between a National bubble and a local bubble.  I think that we've already established that you were referring to a National bubble, so why the "semantics" response anyway?  Anyhow, on to the point.  Local bubbles do exist.  If anything, niravmd proved this point I made in my response.  However, just because California may be in a bubble doesn't mean that there is a National bubble.  

Now, with all that out of the way, here's responses to your original post.

Q: I'd like some input from as many of my fellow investors as possible on the question of the "Bubble".

A: I think that you got your "input" in spades.  More so than you wanted it seems.

Q: What alternative kinds of investments would you suggest when this Bubble bursts and values plummet.

A: Since I don't believe in a National bubble, I wouldn't have any other types of alternative investments to recommend.  Even if you were in a local market where a possible bubble was forming, I wouldn't recommend alternative investments.  What I would, and did, recommend, was that if you know your market and know your business, that you would be able to make money in any type of market, including a strongdown turn.  If real estate is your business, then it ceases to be investments and that's where the real difference lies.

Q: Keeping in mind that the Economy as a whole is kept afloat, at least in part, by the Real Estate Market, We MAY be in for quite the flush.

A: Refer to the answer(s) above.  I think that they cover this one.

Q: Until things stabilize again and values start to go back up, what are the most attractive investments aside from Foreign Currency and Gold? Any thoughts?

A: In a dump market, my first investment would...real estate.  Why?  Because it's cheap.  If you wait for the values to go back up, then you've already missed the real deals and are merely trying to hang on to the coat tails of the real money makers, the ones who truly understood the real estate market and knew how and when to buy for the best value.  As far as alternative investments, I can offer you none, and as Dave T informed you, that topic is out of the scope of not only this forum but this website.

Roger

[acoolmariner]

Roger,

Thank you for spending so much time on me. You've missed it altogether and I'm done talking about this.

[Roger J]

You're welcome for the time.  But please don't stop there.  You say that I have missed "it" altogether.  If that is the case, then please educate me on what I have missed.  I truly would like to know.

Thank you.

Roger

[$Cash$]

Let's see here, let me get this straight, three of the top professionals in the business John Michael, DaveT and Roger J, respond to help this person and according to this poster you guys don't get it.

Amazing simply amazing.

John $Cash$ Locke

[acoolmariner]

Roger J,

I deeply apologize for what was a Badly worded question. It is not, and never was, my intention to question any of you in regards to your knowledge. That's beyond freakin' silly. You are correct...I missed it. A couple of posters did understand what I was trying to ask, but reading your last reply and going over my original post, made me realize that I was asking a question in a way that wasn't at all clear. In regards to the Bubble, the topic of its existence wasn't of interest to me, ever. Regardless of how it was written, it never was a topic I meant to ask anybody about. I 'get' that you thought it was. That was my fault totally and I'm sorry. My question was meant to be about alternative (hopefully RE related) investments that would be a good hedge against falling RE values, i.e. buying "Puts on Mortgage companies". I don't even know if this is viable. I still need to research it, but now I know about its existence. Futures, I didn't mean to discuss either. I put those in the post to try to prevent discussion about those products I already consider. I know that if RE values go down, RE is going to be THE good choice. That was never a question in my mind. All I wanted to know, was if there was anything else out there that could also make me money if this ever happened (no National bubble implied there in that last sentence). If all I can ask about is RE related investments...what about it then? I already read that you have nothing for me regarding this.

This is what I meant about "missed it" Roger, but it was clearly my fault that it was. I see that. I understand that communication is key, gentlemen and I certainly dropped the ball here.  To johnmichael, Roger J, and Dave T...my sincerest apologies for my defense of such a terribly written question. To my way of thinking, I was asking REIs about RE. I do understand why you didn't see it that way. -cool

[Roger J]

Great.  Now that we're all on the same page, maybe you can get some better answers to your question.

So, and again correct me if I'm wrong, but what you want to know is what would we, as real estate investors, do if we were faced with a market that had a bubble forming, or in a market where the bubble had burst so to speak and property values were declining.

First and foremost, is to know your market.  Otherwise, you won't know when a possible crisis is even forming.  Take CA for example.  People there are still buying up properties, even though it is clearly in a bubble situation.

Can you make money in an inflated market? Yes, but you have to know how to play the game well.  An inflated market is not a good candidate for buy and hold people but great for buy and sell.

Let's look at a market where values have already dropped or are dropping.  What happens exactly?  As values drop, sellers get stuck with properties that they don't want and can't sell.  Many are stuck with payments that they can't afford.  Foreclosures increase.  Banks get stuck with properties that they can't sell, so they drop their prices to get out from under them.  Sounds good as an investor, right?  But many investors sit on the sidelines because the market is so soft and they don't know how to sell them when they get them.  The knowledgeable investor will be making $$$ hand over fist in this market.

Here's a personal example, and probably the closest that we'll get to a real National housing bubble.
The doublewide market was great up to a few years ago.  All the DW's manufacturers/dealers were selling them like crazy.  Only problem was, they were selling them for far more than the buyers could reasonably sell them for on the open market.  Add to that that they would adding in several thousand dollars in fees and extras and these things were simply unsaleable in a retail situation.  
What happened?  The major dw's dealers/makers/financers went belly-up, the economy hit a major recession, and many, many DW owners lost their jobs.  Unable to sell, the properties got foreclosed.  As the foreclosure rate rose, the number of lenders offering financing on DW's dropped, making it harder and harder for the banks now owning these things to sell them.  Heck, it was nearly impossible for an owner occupant to get a loan, an investor loan, forget about it.  What then?  The prices fell sharply.
As I said, most investors ran from this.  However, I looked at this and said, "here's property that I can buy at 50% or less of tax value BEFORE even negotiating."  Once I got my financing lined up, it was on.  I bought several at $25 a square foot!  Better yet, most needed little to no fixing.

The only thing left was how to sell them.  That was the easy part.  All those foreclosures and restrictions on lending opened up a huge market for people that wanted to own their own DW but couldn't get the financing.  The answer:  Rent to Own and Owner Financing.  You lease option or owner finance the property for 2-3 years at which time they will be able to refinance into their own name.  I've already got the lending setup for them if they maintain the lease for term.  Now I've got several properties that produce $300, $400, and $500 dollars a month NET.  Add to that that they'll make from $20K to $50K on the backend and I think that I've done well.  All of this in a burst bubble, or down market.

It's great.  I've got investors, that two years ago, wouldn't consider buying a DW.  Now, they're calling me up and asking if I'll sell what I've got.  They're trying to catch the wave, but they're hitting it late and I get to reap the rewards simply for studying the market and knowing when to act.

If I have to hold onto these things for 2-3 years, so what.  They're great cashcows.  And if you'll look at history, you'll find that it usually takes about that long before the cycle starts turning back around.  With the DW market, it's already beginning.  The lenders, at the height of the foreclosures, were requiring A+ credit.  Most people with A+ credit will buy a stickbuilt, not a DW.  There are several now that will lend to low B and high C.  It won't be long before a lender realizes the potential goldmine sitting there and start offering D credit (at high interest) their chance, and then the market will start climbing again.

hope it helps,


Roger

[niravmd]

My previous response in this thread only disputed nirvamd who implied that there must be a national bubble because his market is in one.

i did no such thing!!!
i just said California was in a bubble and you totally jumped to the wrong conclusion.

i'm actually moving my real estate out of over-valued california and into a place which is highly undervalued.

[Marylander]

Good info on "Bubble"
http://patrick.net/housing/crash.html