Yeah, you can still make money in real estate. But it’s a lot harder to do in a falling market, than in a rising market and the risk is much greater. And you have to add value via the subdivision process, through vertical development, etc. Just buying and waiting for appreciation will not cut it anymore.
I think your landlord is dealing in special situations and because land in Riverside is topping, he may have just caught the tail end of the market. It’s going to start falling in value and those kinds of deals will be harder and harder to come by.
I am the guy who retired off my last land deal (after 30 years in the business and lots of risk as well as going bust a few times, I walked away with a boatload of cash) but believe me, I would never tell anyone to go into the land business at this point in the game, because it is far more difficult in California than it has ever been.
First off, the entitlement process is incredibly onerous and environmental constraints add a lot to the risk and cost of subdividing land. Your landlord is basically doing a flip or bought a piece already entitled. There is no way he would have been able to get subidvision approvals that quickly (unless he did a down and dirty parcel map, which is four lots or less, not a major subdivision, which is five or more lots).
His homes down south were purchased after a special situation (sort of like a mini-market crash but with a local flavor) but if this market tanks on a national scale, those “good deal” homes are going to turn into alligators pretty quick.
As an aside, I think Kiyosaki is a total fraud. I knew him years ago and he was an absolute flake. He doesn’t know dink about developing or investing in real estate. And that story you posted about the guy who wants to pick up deals in Carlsbad that ran in the Sunday Union (I read it too) and invests with a guy named De Voos (SP?) — well I read his book too and threw it out, it was such dribble. What a load of dung that thing was.
If you want to know more about Kiyosaki, De Voos or any of the hundreds of other real estate scammers out there, go to the link below and read what John Reed has to say about him/them. (Read is an honest, tell it like it is, real estate investor and writer with impressive credentials and his books tell the truth about this business):
Also, if you haven’t already, you should read my post at the link below, which contains information from someone in the land acquisition and development business, working for a very large public builder:
Lasty, I really enjoy your posts and your candor in admitting that sometimes you may get a little too aggressive in your predictions. You are just trying to sort this all out, as are all of us. I mean who knows what is really going to happen?
At least your prognostications are based on lots and lots of individual research — I have no idea how you have so much time to read, let alone post — I am retired and can barely keep up with this website.
Real estate has been wonderful to me but I think it’s time has come to an end (for the little guy anyway) for the next decade or so (at least in California and maybe the rest of the US).
Having said all that, if you are going to invest in real estate, I would find reasonably priced apartments (multifamily) with realistic cap rates or lots of rental upside. Again, John Read will tell you the truth about buying those kinds of properties. As for me, I’m in short term treasuries (30-90 days) and will remain so until a clear trend emerges and it’s time to start buying again (which could be years).
