My Two Cents

Real estate investment is risky

Chris Farrell Jun 12, 2009

Bud Hebeler of sent out a note about a presentation he gave at a real estate seminar. I’m a big fan of his website and conservative financial advice. He offers an important cautionary note at a time when I am hearing more and more people interested in getting back into the real estate speculation business. (It’s a good time to look for a home, a primary residence; the caution is about real estate investing or speculation.)

The remainder of the presentations were from my friend who talked about his own experiences with investment real estate, followed by a local banker who talked about lending, followed by a real estate brokerage manager, and last a property manager.

The gist of their presentatins was that this was a good time to buy small houses for investments because you could get them so inexpensively, most often far below their original listed prices. They found the best buys by looking for houses that would be good for very low offers including those that were short sales, foreclosure auctions, expired/canceled listings, and houses that had been on the market for over 60 days.

The problem I saw was that you’d have to own many houses to reduce the risk within the real estate part of a portfolio. I’ll stick with buying REITS when I feel it’s time to get back into the real estate market–and I continue to hope that the last of my real estate partnerships will sell someday before I die.

I agree. The risk is far too concentrated for most people. Real estate investment trusts or REITS are a far more cost effective and sensible way to add real estate exposure.

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