I just heard another news story yesterday that once again blamed real estate investors for part of the housing market mess that we're in today. The analysist that was being interviewed explained that if it weren't for the greedy investors buying up houses and selling or renting them out"To Make A Profit, then we wouldn't be in this mess. What this idiot just described was a "Speculator" not an actual "Investor."
I work with a number of professional investors and we purchase, rehab and re-sell homes based on a financial modeling system and careful evaluation of the properties. If the risk is far greater than the benefits then we pass. If, on the buy and holds the positive cash flow doesn't meet my client's needs then was pass. Investor's know that positive cash flow is golden just as they know that days on market can be a curse.
One of my neighbors was a speculator. He operated under the mentality of the "Everyone is buying and I want in on it too" theory. His brother was a Realtor and my neighbor had cashed out his entire 401K, took the tax and penalty hit to purchase 4 homes within 6 months. I asked him what his cash flow plan was and his response was a common speculator's answer "I'm not exactly sure but in a few years I'm selling." Well, he was right about the selling part.... SHORT SELLING. As it turned out he was eating a negative of around $250.00 a month or more on each property. He sold his house down the street from me and filed bankruptcy shortly after the start of the market decline and I never saw him again.
In my opinion there were many hands in the pot causing the market's decline, however, I rarely ever hear about the investors that buy undesirable properties, rehab them back to a good or great condition and sell them for a profit, which helps increase neighborhood values. That's right news reporters and analysts "A Profit." Without that profit then why would they take the risk?
Next time you hear about investors contributing to the crash just consider the source...