A few months ago I was riding between LA and Reno on a Southwest flight listening to the occupants of the seat behind me talk about real estate. The “old pro” who had been investing for a year was initiating the neophyte in the adjoining seat in the rites of real estate investment. She took pains to reveal that she had just returned from her condo in “Vegas” and was on her way to her place in Hawaii. She’d been able to quit her job as a beautician and retire on the money that she had been able to “pull out tax free” from her houses.
Somewhere in the conversation, she elicited that the innocent next to her owned a house with a $200,000 equity. She seized on this to explain how much was being lost every month because this equity wasn’t being used to pyramid more wealth. As she explained it, all that needed to be done was to pull out the equity in a home-equity loan, then, instead of using the money to buy one house, it should be spread across 20 houses that would create wealth 20 times as fast. As she explained it, by throwing in some tenants and allowing them to make the payments, true wealth was just over the horizong.
What intrigued me was the total assurance she had that houses always go up, and that you can’t lose. She also allowed as how she had a personal web-site that could be accessed by paying $200 per month in which she revealed the secrets to wealth. When her gullible, trusting seat mate inquired as to whether there was room in her “system” for one more, she made the generous gesture of taking a check for the first months “dues”.
Here’s an axiom I hope you’ll take to heart. “There is nothing easy about making money with single family houses and keeping it.” Sure, a lot of money can be made, but it takes a lot of very well paid hard work. Anytime someone sidles up to with an easy money proposition, run to the darkest closet in your house and hide until he goes away.
