#18 – The Illiquidity of Real Estate / The Best Deals That Aren’t, by Jason Hartman
In this video from http://JasonHartman.com, you’ll find out why the illiquidity of real estate makes properties investment an excellent investment choice, and how some “great deals” can turn into fiscal nightmares. http://CreatingWealthPodcast.com
At times you hear people talk about the volatility of the real estate market. If you want volatility, try the Wall Street conspiracy. They’ve got volatility. Why? Because they also have liquidity. . . instant liquidity. Anyone can log onto their account and buy or sell a stock with the click of a mouse.
Real estate is a cat of a different color.
It is an illiquid asset. Even if you woke up one morning determined to sell a piece of property and there was a buyer equally set on the purchase, chances are it would still take two weeks or, more likely, a month before the deal could be closed. It’s a much more complicated process. An offer must be made and accepted, financing arranged, third party inspections made, title search, etc., before an official transaction can ever be made.
This lack of liquidity is a good thing when it comes to investing. It’s what makes real estate such a stable, appreciating asset. It’s also why, if you’re living paycheck to paycheck, you shouldn’t use your lunch money to buy income property. If the time comes that you need to get out of it quick, you might not be able to. Investing in real estate should be done for the long term with money you don’t need for day-to-day survival. Then you can leave it alone and watch it grow.
Why the Best Deal Isn’t Always (From the JasonHartman.com blog)
I came across an article recently that illuminated exactly why we believe our strategy of having local property managers in various areas around the country saves Platinum Properties Investor Network clients from similar tales of woe. It’s all about micro-targeting location before you EVER pull the trigger on a real estate deal. Is micro-targeting important? Only if you want to avoid having a great $1,000 positive cash flow deal turn into a $30,000 legal hassle.
Gather ‘round the campfire kids, and learn why you have to look further into the ‘great’ deal before you buy it. In this example, the buyers were in the early days of their income property career and got starry-eyed over the prospect of a no-money-down deal. Who wouldn’t want terms like that? Talk about leverage! Problem was, in their haste to not miss out on this ‘deal of the year’, they didn’t check out the local area thoroughly.
What sorts of problems? To start out, the entire block was occupied by an army of drug users and dealers, plus a host of other nefarious characters. No matter how nicely that property was fixed up, think a stable renter is going to want to move his or her family into that war zone? With crumbling ruins flanking it? Next, our intrepid investors were enmeshed in court with fire code violations and a property manager up for manslaughter. Gulp.
Bet they wish they had been getting their real estate recommendations from Platinum Properties! That’s why we have local managers with feet on the ground and an intimate knowledge of the neighborhood.
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