Real Estate Revisited

I was on a local phone-in television show recently dealing with general issues relating to money, credit and investing. That day, I spoke with several people who had general money questions and was taken with how many saw buying real estate as a magic solution to a myriad of financial problems. One woman had no savings, significant credit card debt and wanted to know if she should buy real estate as a way out of her situation.

These people were spurred on by two of my fellow panelists in the business of selling real estate or mortgages. The lender was promoting low or no-down payment and interest only loans and, unbeknownst to the producer, had a paid infomercial run during the broadcast.

I left the studio that day even more deeply concerned about how many will be hurt if the rapid rise in real estate comes to a precipitous end. Certainly those who buy homes that they can afford to carry over the long-term will be alright. But those who chase real estate using risky financing techniques are dependent on being able to sell the asset for a quick profit. Those individuals may find themselves unable to meet their debt service and ultimately default.

It strikes me as odd that investors are attracted to investment assets, in this case real estate, solely by virtue of and, after a period in which, the asset has appreciated rapidly. That's the time to sell from my perspective.

Susan