The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: patron_anejo_por_favor who wrote (28998)	4/1/2005 6:44:46 PM
From: orkrious	Read Replies (1) of 306849

fleck's RE mania chronicles entry for this evening Here is one for your real estate mania chronicles. As a professional real estate investor, it even stunned me. Today I walked into the local REMAX (real estate office) to visit a few friends but was intercepted by a real estate sales person that I had never met before. He introduced himself and wanted my opinion on an "opportunity" that had come his way. A friend of his had recently bought two condominiums with very little cash down believing that she would be able to "flip" them both for a quick profit. But it seems that the market in that particular region has slowed somewhat and she cannot recoup any of her initial investment. Further, because she cannot rent the condos for as much as she had anticipated, they are both generating negative cash flow. So she just wants out of her investment without damaging her credit. His "opportunity" was to take over his lady friend's investment position and assume the debt at no cost to himself. He wanted to know what I thought about this circumstance. Puzzled, I asked him, an experienced real estate agent, why he would consider "assuming" a liability that had no chance of being sold for a profit at present, all the while generating a negative cash flow. His answer was that he didn't want to pass up a chance to buy real estate with absolutely nothing down and that he could handle the negative cash flow from the commissions he earns selling real estate. When the market improved (a certainty in this man's mind), he would sell the condos for a tidy profit, and with no up front capital invested, his internal rate of return would be infinitesimal! Oh boy. Need I say more? • This comes from a friend, who is a very successful real estate investor in California... all I can say is, wow.

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