We are all aware there were a lot of real estate investors that made a lot of money buying and reselling, and frequently before construction was completed. Those were the ones that were really knowledgeable of the market; or maybe, just plain lucky. Then there were those that just got caught-up in the frenzy, didn't know when to get out, when the getting was good and got stuck with a lot of liability. There are a lot of them particularly in the State of Florida. When it gets to a point where they cannot, or elect not to continue to pour more money into a seemingly investment gone badly they look for a way out. If they already have a loan on the property and cannot sell it, they consider just letting the bank/lender foreclose. Then the lender gets property they do not want. If the Investor contracted on a property to be built with a deposit, they may consider just walking away from the deal and breaking their contract likely forfeiting their deposit. And the developer gets the property back that they do not want.
Compared to the Stock Investor, the Real Estate Investor seems to have it pretty good. In both cases of purchasing and getting a loan or contracting with a deposit, the Real Estate Investor has paid out a small fraction of the total cost of the property and can get out with only the loss of a fraction of the total property purchase/contracted price. In purchasing stock you pay the total cost up front and it is yours no matter whether it goes up or down in value. And like the Real Estate Investor you buy it with either the knowledge or belief that it will go up in value and make you a good profit. But you cannot just give it back to your stock broker or get him to pay you back all or part of your loss should the value go down. On the other hand if the value went up you would not share your profit with your stock broker or the Real Estate Investor with his Realtor.
The Real Estate Investor that puts down a deposit on a contract for a property to be completed in the future is much like the Stock Investor that invests in the Futures Market. Here the investor has a margin account with the brokerage firm. He buys a number of shares of stock paying only a fraction of the cost of the total value, again like real estate with the knowledge or belief that the value will go up. Unlike a real estate investment......there is no walking away if the value goes down only losing the fractional value. Your margin account is insured by ALL YOUR ASSETS.
Whether it be a real estate or stock investment there is no assurance that the investment will be profitable. In both.....IT IS A GAMBLE.
Don Pickett, Realtor, Coldwell Banker Hartung and Noblin, Inc., 850-591-4725, donpick@aol.com www.tallahassee-area-homes.com
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