Real Estate Investing Seldom Yields Riches

If you watch late night TV or read the business section of your local newspaper, you’ve undoubtedly seen the ads or infomercials telling you how you can get rich in the real estate market. The pitchman, looking dapper in his $1000 suit, tells you how he used to work in dead-end jobs, how he struggled to make ends meet and how he found the secret to success - real estate investing.

He’ll tell you how he now owns hundreds of houses, how he bought most of them with little or no down payment, and how they generate tens of thousands of dollars per month in income. Then he will have you meet other people who have successfully used his plan to achieve similar success of their own. All you need to do to get in on the riches is to call the toll free number and order the “kit” containing books, tapes and/or compact discs. Or perhaps you need to attend an expensive, in-person seminar that will explain everything to you in detail.

Is this on the up and up? Can you get rich investing in real estate?

Well, yes and no, and probably no. There were times in years past when the real estate market was soft, the job market was soft, and interest rates were high. During those times, in the early 1980’s, it was quite possible to pick up houses for next to nothing. We know of one person who bought a couple of houses in Houston, Texas in 1982 using his credit card. They were that cheap, and the foreclosure rate was so high that people were letting houses go for next to nothing.

Those days are gone. With the stock market crash of a few years ago, investors of all shapes and sizes have been putting their money in real estate. Sales have reached record levels for each of the last three years, and home prices have shot through the roof. In order to make money in real estate investing, you must be able to pick up the houses for little money out of pocket and then resell the house at a profit or rent it out. In the current market, opportunities to get a house for little money are rare.

Making the situation worse is the fact that thousands of people just like you want to try their hands at real estate investing. This results in prices going up, rather than down, and properties becoming harder to get than ever.

Yes, some of the techniques used in these books and seminars might work, but some are only marginally legal and others are fairly unethical. Some of these schemes involve talking to desperate people and offering them next to nothing for their home. That might work, or they could just sell it themselves. Still, if you managed to talk someone into signing their house away, and simply turning over their hard-earned home equity to you, how would you feel about that?

The best way to make money in the real estate investing market is to sell real estate investing books and seminars. That seems to be a growth industry, although as more and more people realize how hard it is to get rich this way, even that market may fall flat.