[quote=EconProf]Back when prices were rising 1 – 2% per month, many people made good money buying fixer-uppers, making all the improvements, and then selling them 6 months or a year later. They congratulated themselves on their skills, but forgot that it was a rising market combined with their leveraged position that gave them most of the profit.
In a falling market, both of those factors work against you, so the idea fails big time.
Add to this the tendency to underestimate fixup costs, ignor their own time committment, downplay transaction costs getting in and getting out, ignor the opportunity cost of their down payment, and you’ve got a losing proposition except in rare times and with the perfect property.[/quote]
Beautifully put. You hit on all the key points. Your post should be required reading for anyone contemplating investing in real estate. People still seem to overlook the fact that real estate is a risky, illiquid, high carrying cost investment that must provide substantial returns to compensate.
