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Category: Investment (page 10 of 20)

December 19, 2007

The Perfect Real Estate Investment VS A Million Monkeys

by

Real Estate Investments Broker

Author website

Dear Real Estate Investor:

Times are tough. Did you think sooner or later they wouldn’t be? Is that why you’re spinning yer wheels searching for the perfect property in the A+ location, priced under the market?

Are ya leaving milk and cookies on the table for Santa next Monday too?

Take a minute and breathe deeply the gathering… Oops, sorry, had a 70’s flashback. Let’s start again.

We’ve all seen investors who’ve been fairly successful. Ever found one with a portfolio acquired only in boom times? Silly question isn’t it? When did they buy, making their biggest long term hits? Wait for it — here it comes — in the down times.

Next, ask them how many perfect properties they own in the best locations possible. The answer to that question, after they stop chuckling, is a big fat zero, zip, nada.

Besides, if you actually found that property, you couldn’t afford it anyway. 🙂

Invest in properties in solid growth areas, where jobs are plentiful and the other fundamentals are in place and for real. Buy them when the times are tough — hey! that’s now. Make sure you can use reasonable leverage with old fashioned loans. Demand they break even or better before tax, and cash flow easily after tax.

Don’t insist on staying local, as your market probably sucks more than a new Dyson. You already know that though, right? So what’s the problem? You think you’re better off being able to drive by your property? Do you wanna drive by mediocre or occasionally fly to excellent and stellar? Is the decision really that difficult?

If this doesn’t come across as written by Captain Obvious — read it again. The differences between highly successful real estate investors and the rest of the crowd makes for a long list. The two biggest differences providing the most profitable impact?

Successful investors don’t need perfect properties — and they buy in buyers’ markets whenever possible, as much as possible.

This isn’t from the third tablet Moses lost on the way down the mountain that day so long ago. Buying in a buyers’ market isn’t a genius Read more

December 18, 2007

Looking Through the Wrong End of the Telescope

by

Real Estate Investments Broker

Author website

This Texas trip has been both productive and instructive in so many ways on several levels. Sitting in a hotel room just a quick shuttle from Dallas’ Love Field, a dead pizza on the coffee table, I’ve been meditating on events of the last three days. I say meditating cuz that’s all I can do with the energy I have left.

The subject came up in a meeting earlier in the day — why some transactions fail. Specifically, why do some fail for reasons unrelated to either objective analysis, actual benefit or harm, or simply cuz one side, sometimes both, begin to care what the other guy’s getting? Though it used to make me crazy, these days I just watch to see how far some folks will go to ensure the other guy fails to get something he wants — as opposed to doing their level best ensuring he gets what he wants.

Here’s an example.

The buyer of a 4 unit property discovers through casual conversation, into what the seller is exchanging. The 4 unit seller is tax deferring his equity, a touch over $200,000, into 8 duplexes in another state. Because the seller’s broker gave the buyer’s agent info on those duplexes at his request, the buyer has also seen the info. No big deal you say?

It shouldn’t be.

The buyer though, sees it as something he’s never been able to accomplish. That guy is getting too much of the pie — or so reasons the buyer. Who really knows what generates this self destructive attitude?

How the hell can this guy take one little property and end up with almost $2 Million of brand new units? Who’d he hafta kill to make that happen?

So during the inspection period of their deal, Buyer decides he’s gonna stick it to Seller as much as he can. After all, he’s the one turning mud into gold, right? Why should he care about a few thousand bucks in unnecessary maintenance?

Buyer proceeds to pile it on, never forgetting how he’s only getting a lousy 4 units and this guy’s somehow secured Read more

December 15, 2007

Government interference will prolong housing woes

by

Suburban Phoenix Real Estate Broker

Author website

This is my column for this week from the Arizona Republic (permanent link):

 
Government interference will prolong housing woes

Want to make an economic problem worse? Interfere with it.

As I write this, the Federal Reserve Bank just cut the Federal Funds Rate by another quarter-point. Why? To try to stimulate the housing market.

Last week President Bush put together an attestedly voluntary agreement among lenders to freeze interest rates on certain adjustable rate mortgages for five years. The plan is voluntary in the same way that your rowdy Uncle Sid volunteered for the Marines instead of serving 90 days in the clink. Even so, Congress is still rumbling about involuntary solutions to the housing crisis.

So what’s the beef? Everybody’s just tying to help, right?

The problem is that all investment is based on planning. Before I risk my capital, I need a reasonable assurance that it will be returned to me — ideally with a healthy profit. There is always some risk in investing, but if the government can change the rules of the game at any moment, then the risk of investing soars. Doing anything else becomes much more attractive.

Consider: If I plant the right seeds and cultivate them properly, I can expect a bountiful harvest. But if the government were able to control the weather, and if it announced that it might or might not schedule a hard freeze for mid-July, I would be better off doing almost anything other than farming.

If I have capital available to lend, should I lend it where I know for sure I’ll get five percent interest, or should I lend it to a borrower who will promise to pay me eight percent — until Big Mother cuts that back to four percent as an act of mercy. If it were your money — and in many cases it is, in the form of insurance and pension funds — what would you do?

It’s plausible that we’ll go through the same amount of economic pain, with or without government involvement. But free markets self-correct quickly, liquidating bad investments and getting back to business. Government interference will almost certainly prolong Read more

December 12, 2007

We’re All Sub-Prime Borrowers (Who Consume Oil)

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Residential lending is in a pretty tough spot. Mounting losses, from former white-picket fence owners, are putting a dent in the country club sets’ wallets. The problem is not unlike the one we faced 20 years ago; bankers turned into riverboat gamblers.

That’s all changed. Today, sobriety is the buzzword in residential lending as the conduit lenders act as if borrowers were trying to pry the money for a home loan out of their children’s piggy bank. If it weren’t so serious it would be comical.

The bankers think that every American is a sub-prime borrower. Until they can reach a consensus on an economic model, Wall Street securitizers will drive this culture of paranoia into the hearts of the newest of mortgage company employees.

Who will save us from this madness? The oil merchants, of course. It’s in their best interest to jump start the little economic engines we call “our neighbors”. If the old lending model was based upon undervalued real estate, the new one will be based upon the nature of the little pink house owners, to buy pimped-out Sherman tanks for their driveways. As long as the American consumer can continue to expand his consumption of gasoline, the oil merchants will finance our homes.

Mark my words, the oil barons will be the new round of fresh residential lending capital. It makes perfect business sense. If your key account is slowing down the orders, give them a little credit to get the through the tough times. That’s EXACTLY what the sheiks will do and they’ll make a killing doing it.

The average American is NOT a sub-prime borrower. Hell, even the sub-prime borrowers aren’t really sub-prime borrowers. Americans really are honorable and most believe in a brighter future. As long as we continue to put men on the moon, develop new communication technologies, and cure otherwise incurable diseases, Americans are the best long-term bet in the world. Debt is an affirmation of that belief. Our biggest vendors believe in us because without us, Read more

December 8, 2007

Happy Homeowners Act of 2008

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

I’m thinking of getting into politics. I’ve been watching testimonies, from both sides of the aisle, about the credit crunch and impending doom of mass foreclosures. I figured out the problem:

The housing prices were too damned high.

Now, my stance, to this point, has been pretty clear; let the market act as markets do, with commensurate consequences to each and every market participant. Lenders and borrowers lose. Lenders lose money, and borrowers lose the freedom to buy another home, with the use of a mortgage, for a period of 4-6 years. (remember that statement)

As I’ve said, I’m thinking of getting into politics so that straight talk and libertarian approach is somewhat unacceptable in the vote-seeking game. I think I need to find a solution that will put me in a picture, alongside Hillary, Arlen, Barney, and Hank. My solution may also fire a shot across the bow of our economic enemy, China; that’s just a bonus for the cold warriors among us.

The Happy Homeowners Act of 2008 understands that foreclosures are far reaching in their devastating effect. They leave homes vacant in neighborhoods, they attack the esteem and morale of the borrowing family, and what is often left unsaid, they whack the investors’ principal. Talking heads have said that the homeowners just want to live in peace and harmony, in their slice of the American Pie. So… here’s my proposal:

Mark to the Market or yell “do over”. We’re all in this together, right?

1- Homeowners overpaid for their homes. Those homes are worth some 20% less than what they paid for them. The investors will take a loss of 20% (or more) should they proceed with foreclosure…so…just take the loss today. Reset the loans to a loan amount the borrower really can afford.

2- Investors will lose money but can recoup some of those costs from the market participants that profited. Real estate brokerages, mortgage brokerages, originating lenders, servicers, Wall Street securitizers, appraisers, home inspectors, stagers, and everyone who made a dime off the transactions during the “excessive period” Read more

December 6, 2007

Compassionate Conservative or Banana Republican?

by

Suburban Phoenix Real Estate Broker

Author website

I have a tremendous admiration for George W. Bush, the President of the United States. My reasons are legion, and the rest of America will have to wait for historians to explain to them just what a great man they have so completely scorned in their well-scored chorus. But Phil Boas of the Arizona Republic gave us all sufficient reason to revere this president in just a few words:

American presidents for three decades have kicked the can of global terror down the road for some other poor sucker to deal with. George W. Bush did not. And that’s why, even when it’s utterly unfashionable to say so, I still greatly admire his leadership and courage. Thank you, President Bush.

Even so… The man is a politician, a currier of favor and a courier of tyranny. “No child left behind” will assure that no poor child will ever again get ahead. The Patriot Act should give nightmares to any patriot who can envision yet another President Clinton. Government never grows so large as it does under the cultivation of allegedly anti-government Republicans. And now… Full-blown Banana Republican bail-outs, as a reward for financial error.

From Cafe Hayek:

Today’s Washington Post brings a nice example:

“President Bush will announce this afternoon an agreement with major mortgage firms to freeze interest rates for five years for financially troubled homeowners — a plan advocates say will help forestall a major foreclosure crisis but some conservatives say amounts to a bailout of people who made bad financial decisions.”

Bush, the so-called conservative who supposedly believes in the "ownership" society where people take responsibility for their own actions and act responsibly because they bear the costs and reap the benefits, is going to bail out people who acted irresponsibly. I love the end of the WaPo quote—"some conservatives say." The implication is that other conservatives and liberals disagree. But isn’t it a bail out of people who made bad financial decisions? Would anyone disagree?

I like this part, too:

“But it appears no tax dollars will be used to subsidize the freeze on interest rates. That cost would be borne primarily by lenders and Read more

December 5, 2007

Sharks Eating Sharks: It’s 1974, All Over Again

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

“You suck!”

“Well, you’re a big fathead !”

I like to watch the stock market opening on Bloomberg Television. The cable company lets me have Bloomberg, free, until 8AM so I can get my fix while I lay cocooned in bed.

A few weeks ago, Goldman Sachs, the premier investment banking firm, told Citigroup that they, basically suck. Today, Citi told everybody that they all suck just as much.

Treasury Secretary, Hank Paulson calls an audible from the Nixon playbook, Ben Bernanke is cranking up the printing press and the American public is depressed.

Slip, Freeze, Crash, Buy. When the sharks start eating the sharks, it won’t be long before you can start picking through the bones for a few good morsels.

Listen to Warren Buffett. He bought an American institution, in 1974.

November 27, 2007

Countrywide Bankruptcy Likely? Not While the Feds Are Bailing Them Out

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

I’m a Countrywide watcher. It’s size and reach in mortgage loan origination is worthy of any mortgage originator’s respect and admiration. I had a lot of confidence in Countrywide as it marched to becoming America’s largest originator of home loans. I liked ’em so much that I had a piece of the joint, in my IRA, until April 1, 2007.

It was no April Fool’s Day joke when I announced that they were in trouble because of the Pay Option ARM product. For the Series 7 types, I went from long to cash within 24 hours of writing that post, then short ( not in my IRA) 24 hours later. I was nervously wondering when Wall Street would catch on to the problems and decimate the stock; I felt it would be worth less than ten bucks a share. Alas, I chickened out and closed the short position to raise cash during the liquidity crunch of 2007; I figured that profit would pay my daughter’s tuition when the market slowed.

Wall Street still thinks Countrywide is a twenty dollar stock, even as it trades below nine bucks a share. Are they being fooled, like the Enron debacle, or do they know something that we don’t? While Wall Street fiddles the Mozilo tune, pundits think CFC could file any day now. I don’t think a Countrywide bankruptcy is likely. I thought it made sense for the Feds to bail out Countrywide; two days later they opened the discount window.

How are the Feds bailing out Countrywide today?

1- Certainly, as Countrywide has moved it’s fundings to its federally-chartered bank, any Fed market activity benefits them.

2- I said that they way out of the mess was for Countrywide to originate new loans in less risky programs. CFC has rolled out a major reverse mortgage program and is compensating brokers to refer those loans to them. While some people believe its actions violate the spirit of HUD laws, there are no HUD guidelines specifically forbidding this practice. Reverse mortgages are three times Read more

November 23, 2007

Black Friday — Not Just Crazed Women Shoppers — Drinking the Kool-Aid — Perception and Confidence

by

Real Estate Investments Broker

Author website

What takes hold of women on Black Fridays? It’s like a perfect storm of planned group hysteria, guaranteed bargains galore, and shopping, shopping, shopping. Realizing how many women will take umbrage to this, I hereby stipulate only a smallish minority participates in this annual ritual of dueling plastic at dawn.

Pardon me — did I say dawn? My bad. How ’bout 4 AM?! And this after coma inducing feeding frenzies the afternoon before. I guess when the monkey needs feeding, energy isn’t a problem. 🙂

I see on the far horizon the possible sighting of Black Friday, The Real Estate Version. As my crystal ball is as cracked as yours, I’ve no idea whatsoever when it’ll begin. I’m sensing it though. It’s coming from that spot located in the back of my head, where all the small voices reside. This voice is barely audible. I’m not even sure if it’s the right voice, but I know one thing — it’s louder today than it was last month.

Like malls around the country, holding the fort against the hordes of shopping junkies, there is method to their madness. There’s a clearly perceived empirical benefit driving them. I have to believe that, cuz my own mom talked my own Much Better Half into participating. Yep, I awoke this morning just before 10 from my expertly induced Thanksgiving coma, to find Trophy Wife asleep on the couch in front of the TV. Nothing like doing over five hours of pre-dawn battle with Black Friday Kool-Aid drinkers I guess. 🙂

Let’s create an analogy here to the current real estate correction.

Assuming the annual January clearance sales will follow the holidays as night follows day (for Black Friday participants, kinda like the hair of the dog) let’s call post January, The Shopping Correction.

The RE Correction has lasted for over two years now, or roughly the equivalent of these things historically. For shoppers, going from January to Black Friday is an eternity, much as this correction must seem to most who’re feeling the pain of the RE version.

What if, as my little voice seems to be Read more

November 23, 2007

California Sub-Prime Bailout: Rewarding the Feckless

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Governor Schwarzenneger brokered a bailout for California sub-prime borrowers with four major servicers:

Countrywide, GMAC, Litton and HomeEq – which collectively service more than one quarter of subprime loans to people with poor credit – agreed to maintain the initial, lower interest rate for some subprime borrowers whose rates are scheduled to jump significantly higher. To qualify, borrowers must occupy their homes, have made their payments on time and prove they cannot afford payments with the higher interest rate.

You had to see it coming. California is a mess right now with foreclosures. An argument could be made that sub-prime borrowers weren’t charged enough for the risk lenders took on them. Did the Governor, in fact, reward the feckless few who blindly bought into an inflated market? Does the measure penalize the responsible who waited for realistic prices and saved their sheckles for a down payment?

Two stipulations of the bailout are:

(a)- the borrower must be making timely payments, and

(b) the borrower must demonstrate an inability to service the higher payment.

While sub-prime loans are traditionally earmarked for the credit challenged, lenders extended these loans to good credit borrowers. Those borrowers bought a home that they couldn’t afford, with no money down. This program may very well reward people who lied to get a “smokin’ deal” and who now cry foul when that subsidized deal is taken away. The only exit strategy these borrowers had was to refinance out of the loan. That strategy was predicated upon a continual rise in property values. I know this; I work in the eye of the hurricane.

So, does Gena Reide. She’s a real estate broker in Sacramento, a community that has been hit hard by the meteoric rise in prices and subsequent drop back down to reality. Her ebullient report about this measure suggests that it is an idea that is long overdue.

Many have said that the homeowners in foreclosure should take responsibility and not receive any bail-out help Federally. It’s time that everyone realize that this doesn’t just effect those homeowners losing their homes, it effects Read more

November 10, 2007

Want Garlic On That Ice Cream? You Don’t Want Cash Flow On Your Capital Growth Either

by

Real Estate Investments Broker

Author website

Dad, when he was poor, survived on peanut butter and onion sandwiches — no lie, as I couldn’t make that up. 🙂

Though not nearly as weird, I like spinach salads with olive oil and malt vinegar. garlic ice creamI’ve not run into anyone else who likes it. They usually put balsamic vinegar on instead. Go figure. 🙂

I love garlic in my stir fry, onions too. The malt vinegar on my spinach salads might be a little quirky, but not up to the level of garlic on ice cream, know what I mean, Verne? Not even if it was free. 🙂

The same goes with cash flow. It goes well with retirement. In fact, surveys show it’s #1 on retirees’ wish list — more of it, that is. 🙂

You’re invited to my place, for a short weekend read on the subject of how cash flow can actually significantly reduce your ultimate retirement income.

The misuse, or rather, poorly timed pursuit of cash flow is maybe the most misunderstood factor in real estate investing.

While you’re there, try listening to a podcast or two. By far, the two most popular are Purposeful Planning and Grandpa Economics.

Enjoy your weekend.

November 6, 2007

HR 3915: Anti-Consumer Bank Protection Act of 2007

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

HR 3915, the Anti-Consumer mortgage bill has passed the House Financial Services Committee. This was expected. The committee is chaired by the bill’s sponsor, Barney Frank. This bill seeks to destroy the consumer protections, guaranteed by free markets, through: a legislated oligopoly, a reduction is loan choices, and a contraction of loan pricing options, all dressed up as consumer protection.

This isn’t cause for concern…yet. Today’s House FSA approval was akin to a Politburo approval of Khrushchev’s recommendation of the Communist slate of officials – with Khrushchev presiding.

The horse trading with this bill starts tomorrow. The bill will be read to the House “Committee of the Whole” where time will be allotted for debate and amendments will be considered. ( C-SPAN junkies, this is where time is allotted to the “Gentlewoman from California” wherein she rambles about baby seals for two minutes and offers her support for the mortgage bill. Then, the “Gentleman from Arizona” talks about the second amendment for two minutes and concludes with his dissent for the mortgage bill. )

Mandatory licensing of originators will most likely be recommended although nobody will really understand why it’s necessary. Republicans and Democrats alike favor licensing- the former for its ability to fleece money from people without the appearance of a tax and the latter because it asserts some level of governmental control.

The “fiduciary duty” rule will be attached, also. Nobody knows what that means but it sounds SO DAMNED GOOD to the little people back in the home state.

Yield Spread Premium will not go away but be limited to 1%. Prepayment penalties will be abolished. A lobbyist will buy a legislator lunch, explain in fourth grade math about how it helps the consumer, who, in turn, will explain the concept to the Committee of the Whole, in third grade math. That amendment will be made and everyone will champion the cause of the consumer and smoke another cigar.

The Committee of the Whole will read the bill for a third time, with my predicted amendments, and the House will overwhelmingly pass the bill for referral to the Senate.

The Distinguished Senate Leader will announce Read more

November 3, 2007

HR 3915: Exploring the Minds of the Enablers

by

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

HR 3915 is referred to as the Mortgage Reform and Anti-Predatory Lending Act of 2007. It was introduced by Congressman Barney Frank of Massachusetts. I explored some libertarian thought about the bill here. I spent the last few days, perusing supporting messages, to discover if I might be mistaken. This is what I found:

The Center for Responsible Lending encourages support of this bill. Here is the letter they want you to write to your Congresspeople:

I am deeply concerned about the plight of 2.2 million families who have lost their homes to abusive subprime loans, or who will lose their home in the near future. Without stronger protections against predatory lending, the same conditions that led to this disaster will inevitably come up again. The Mortgage Reform and Anti-Predatory Lending Act of 2007 (H.R. 3915), which is based in part on existing state laws that have been effective, would help prevent another subprime disaster in the future.

Hmmm, well they fired a biased shot across the bow by referring to subprime loans (in general) as abusive. It lets you know that they despise any loan that isn’t an “agency” loan. The CRL also predicts that (a) more people will lose their homes (b) the disaster, left unchecked, will happen again. What they don’t tell you is that the innovative lending products added some ten million NEW homeowners to the ranks this decade. While 2 million foreclosures suck, a net gain of 8 million homeowners is nothing short of astounding.

The bill addresses many abusive lending practices that directly contributed to today’s foreclosures crisis, including reckless loan underwriting, abusive subprime prepayment penalties, and direct incentives for mortgage brokers to steer families into excessively expensive and risky loans. Basically, the bill would allow consumers to have greater confidence that subprime lenders will refrain from reckless lending and assess whether complex loan products are truly affordable for the families that receive them.

Ho ho ho! Reckless, abusive, and steering! Underwriting is to protect the lenders, not the borrowers. Here comes Big Momma to tell Read more

October 31, 2007

Real Estate Partnerships Under Attack in Congress

by

Commercial Real Estate Broker

Author website

For many of us that are involved in professional real estate designations (CCIM, CRB, SIOR, CRS, etc.), we’ve spent countless hours studying, networking and differentiating ourselves from the pack in order to better represent ourselves and our clients. Among the benefits is being alerted to the fact that someone in Washington is making a move that will impact our clients, their businesses and our livelihood without the aid of the WSJ, CNBC or the mainstream media’s focus on its impact to our profession. Below is an alert I received this evening that I wanted to pass along to the BHB:

CCIM INSTITUTE CALL TO ACTION: OPPOSE TAX INCREASE ON COMMERCIAL REAL ESTATE

House Ways and Means Chairman Charlie Rangel (D-NY) is moving forward with legislation that would make major changes to the tax structure. The bill proposes a massive tax increase for real estate partnerships, raising the tax rate on “carried interest” from 15% to 35%. This legislation would significantly impact commercial real estate projects, most of which are organized in partnerships. Why this legislation is detrimental to real estate practitioners:

  • Drives investors to put their money elsewhere such as stocks with much more favorable tax treatment;
  • Diminishes the value and/or put many partnership out of business because the capital would not be there to facilitate them;
  • Creates a disincentive to investing in real estate since many would no longer earn a reasonable profit;
  • Stifles growth in a part of our economy which has become increasingly important over the last several years due to manufacturing, call centers, and other key industries moving offshore;
  • Punishes partners involved with prior arranged transactions by causing a totally different economic result than all partners agreed with in advance; and,
  • Fails to recognize that real estate investors are involved in their investments daily, while hedge fund managers are not involved daily in their investments.

Contact your U.S. Senators and Representative informing them of your concerns and urge them to oppose the carried interest provision. How to contact your legislators:

  1. Look up your Members of Congress and their contact information;
  2. Introduce yourself in a sentence or two. For instance: “I am Read more
October 31, 2007

Real Estate Perfect Storm Warning: Do Not Miss This Window of Opportunity

by

Real Estate Investor

Author website

One very unique thing about investing is the valuation process.  While there are numerous ways to value an investment, the only true measure is what it can be sold for.  While I can say a piece of property is worth $1 million, if it does not sell at that value it is simply not worth $1 million.

This is essentially the free market concept.  You can set your own price and your business will succeed or fail based on the number of people who think they are getting value.  Another interesting part of this equation is time.  The more time you have to wait, the more likely you are to find someone who agrees with your valuation.  However, as the saying goes, “the market can stay irrational longer than you can stay solvent.”

This is the crux of a very important issue in investor perception.  Most investors make irrational decisions quite rationally.  If I see a house that seems unreasonably valued, and then I see a similar house that is even more unreasonably value, the first house now seems like a bargain.  This cycle continues until investors either run out of money or some event scares investors back into rationality.

The problem then over corrects itself.  Investors go the other way, thinking that every house is overvalued, when it may have only been a handful.  This happens until there is an overwhelming amount of value on the table; so much value that even the most naïve investor could make money.  And the cycle begins again, and again, and again.

Small investors are always the most susceptible to these cycles because they have the least amount of information.  They have no idea where interest rates are heading or where the next hot spot is emerging.  At best they might read the Wall Street Journal or Businessweek.  The problem with this strategy is that by definition news is old.  By the time something is reported, it will already have happened.  Furthermore, by the time your neighbor mentions it to you or by the time you see a special report, the market has most certainly moved on.

This begs Read more

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