"Max Debt, Max Leverage!"

[Ezfreedom]

Duh, that was the mantra in the throughout the Real Estate boom of the late 90's thru Mid 00's. I remember hearing it clearly over and over during a seminar put on by a local real estate super star investor-developer in the Twin Cities. That and "Real Estate has never dropped more than 5% for two years in a row since the 1900's, bla bla bla. Sad thing is I bought into it hook, line and sinker watching my "paper" net worth grow from low six figures to mid seven figures in a matter of 7 years. Whoops. Then the inevitable. The real estate boom turned into a BOOM and CRASH and as the prices fell, so did my entire net worth and then some. D'oh. I've remained the the same business but have spent the last decade digging out only to just this year surpassing the ZERO line on the Net Worth scale. Looking forward to continuing to learn & redefine my definition of success and start focusing on the process not the destination.

 

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[MJ DeMarco]

Welcome aboard my friend. Sorry to hear about the big RE problems, really burned a lot of people around here as well.

 

[fastbo]

A lever operates in 2 directions. Leverage multiplies both your wins and losses. Lack of liquidity is a big problem in real estate because if you run out of cash, game over. Doesn't matter what your net worth is. The people who were able to make it through the best were able to convert their flips to rentals and cover the payments. J Scott did that on one of his houses he bought in 2008.
The ones who got hit hardest were the ones buying 6 homes for appreciation only or buying really expensive homes.

Debt for expansion can be good, but make sure you weigh your risks, and don't get over leveraged, and liquidity (in the form of regular income) is the most important thing because when liquidity runs out, game over.


I also get the feeling that flipping is becoming too popular again... it's once again at an all time high.

Welcome aboard my friend. Sorry to hear about the big RE problems, really burned a lot of people around here as well.

 

[Under-Dog]

I also get the feeling that flipping is becoming too popular again... it's once again at an all time high.

I must agree with you on this one..... flipping is so popular being pushed by all of these RE "gurus". Home prices here in SO.Cal are getting crazy high again, like right before the crash prices.

 

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