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Newbie investor: Buy High, Sell Low!

By Pacita Dimacali

Real Estate Agent with Alain Pinel BRE 01367196

July 14, 2011 07:26 PM

CLASSIC. It's a newbie real estate investor's biggest mistake: BUY HIGH, SELL LOW!

At the height of the market, people who dreamed of themselves as Donald Trump in the making rushed to buy real estate investment properties. After all, the real estate values are rising at a dizzying pace. Why, it's more than double digits appreciation in less than a year! Must get on the wagon, now!

It seemed like the right thing to do, especially since the stock market was reeling from dot.coms turning into dot.bombs. Real estate is brick-and-mortar investment. Must be a solid investment.

2008. Plop, plop. Fizz, fizz...Crash!

All of a sudden these golden treasures are plummeting in value. We read about so many of these "investors" wanting to cut their losses because they can't take it anymore.

That fabulous castle has turned into a fancy doghouse.

Repairs, replacement, and all maintenance issues. Cash out go. Followed by more cash outlays.

Vacancies are scary. Must keep units rented.

Wait...thought we'd have enough in reserve. What? We don't have a reserve account?

Too painful to continue? Yeah, yeah.

Thinking of selling as a short sale? Yeah...uhhh maybe...?

Or strategic default, i.e. walk away and let it foreclose. Ooooohhhhhh....

It's easy to say "Buy low, sell high." But do we?

A seasoned investor once told me, if you don't have the stomach for it, don't.

He said that some people rely on the news too much. And that by the time they get on board on what is the next big winner, they're already too late.

You won't always win...and you have to soldier on when you don't. Expect there will be highs and lows. And yes, sometimes your timing could be great, and the rest of the time, lousy.

Should these would-be real estate moguls suck it up? Or try again? After all, now is when one can truly buy LOW.

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Patti Ann Kasper

EXIT REALTY NEXUS - Blaine, MN

Blaine & North Metro Minneapolis St Paul Real Esta

I've worked with several people who read "Rich Dad Poor Dad" and were basically told, "Yes, You too can get rich quick by becoming a real estate investor"! Too often, they had no clue of what they were getting into or how to get out of it without losing their shirt.

Fortunately, I was able to negotiate with the lender so that they did not seek deficiency judgements against my clients, but the sellers did have to bring some cash to the closing table to get the deals done.

So they learned a valuable lesson. Generally, by the time the TV news is talking about the "latest boom" it is already over! Seems like the media is always about 1 year behind the real estate market, at least in Minnesota.

Jul 14, 2011 07:52 PM

Pacita Dimacali

Alain Pinel - Oakland, CA

Alameda/Contra Costa Counties CA

Patti

This is one of those times where newbie investors probably should consider hanging on and weathering the storm until the ship rights itself.

Jul 14, 2011 08:00 PM

Thanks for stopping by and commenting on my blog. Which widgest did you like the best? I always like to see which ones are the most appealing.

And what are we crazy ladies doing up at this hour of the night???? WORKING! A little after midnight your time, but a little after 2am my time. How time flies when you are having fun, eh?

My newbie investors tried to ride it out, but then they rented it out and it got trashed... That really was the straw that broke the camels back because they had no reserves to fix it back up again.

Live and learn, school of hard knocks, and all of those old sayings are old sayings for a reason.

Take care and goodnight!

Jul 14, 2011 08:18 PM

Ronald DiLalla

Century 21 Discovery DRE 01813824 - Anaheim, CA

No. Orange Cty Real Estate

Hi Pacita, this is cetainly the time for investors to get into the game.

Jul 14, 2011 08:40 PM

Andrea Swiedler

Berkshire Hathaway HomeServices New England Properties - New Milford, CT

Realtor, Southern Litchfield County CT

Pacita, Investing is not for the weak of heart, that's for sure. Although you can buy low now, you need to have plenty of money in order to get it ready to sell!

Jul 14, 2011 11:08 PM

Patti --- sorry to hear about your client. My sibliings and I are in the same boat with our four-plexes--- and I'm trhying to make sure cooler heads prevail. I don't want to lose everything we've already invested in the property. I am confident the economy will bounce back. People need a place to stay especially after they lose their homes.

Ronald --- if I still have money to invest, this will certainly be the time to do it.

Andrea --- investing is like gambling. A little luck, yes. A lot of strategy, yes. And most especially, guts!

Jul 15, 2011 05:51 AM

Chris Ann Cleland

Long and Foster Real Estate - Gainesville, VA

Associate Broker, Bristow, VA

I don't think I would have what it takes to become a real estate investor. But if I did, I'd look at it as having a rental property and the tenants paying my mortgage for me. I think too many investors think it's a quick turnaround (few years at the outside) kind of deal.

Jul 15, 2011 08:42 AM

Kathleen Daniels, Probate & Trust Specialist

KD Realty - 408.972.1822 - San Jose, CA

Probate Real Estate Services

Pacita, I’m seeing a lot of investors in my market. Many of my listings have offers from investors … many all cash offers!

Jul 16, 2011 04:34 AM

Chris -- it takes guts to invest. I admire people who find a way to do it right. I also know of some folks who over-leveraged, and lost everything.

Kathleen -- the investors all know the time is right when there is a slew of foreclosures to pick from and when the prices are a huge drop from where they were just a few years ago.

Jul 16, 2011 07:21 AM

Alan Kirkpatrick

Austin Texas Homes - Round Rock, TX

Alan in Austin

Pacita:

Great post and I love the picture of the dog. ha. Have a super weekend.

Jul 16, 2011 07:45 AM

Alan and Michele

Glad you like it...I love dogs, that's why they figure heavily in my posts and in my life. Have a good and productive weekend!

Jul 16, 2011 08:19 AM

Newbie investor: Buy High, Sell Low!

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