Too much capital tied up in real estate?

Discussion in 'Buying & Selling Real Estate' started by SteakTartare, Nov 24, 2014.

  1. SteakTartare

    SteakTartare Senior Investor

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    So I have a long term business associate that has been very successful over the years. However, he, like many Americans, went nuts during the housing boom. Now a large chunk of his assets are tied up in real estate. He's trying, to varying degrees of success, to sell the properties off.

    Personally, I love liquidity and, beyond my personal residence and acreage, haven't really dabbled that much in real estate. Maybe I should, I don't know.

    Has anyone gotten too involved in properties? How did you get out? Any lessons learned?
     
  2. Peninha

    Peninha Senior Investor

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    I think that the lessons to be learned is called diversification, we should not put all our eggs in the same basked under the risk of having too much capital tied in some poor business.
     
  3. Rainman

    Rainman Senior Investor

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    Investing in real estate doesn't have to be too tricky. Depending on the location of the property it won't be too hard to find a willing buyer. That's why when buying property you should only go for the kind of property which you can easily sell should the need arise. That said, my old man had a number of real estate investments and he didn't have problems selling the property. But to be on the safe side, as Peninha suggests, diversification would help you avoid getting most of your capital tied up somewhere.
     
  4. Gelsemium

    Gelsemium Senior Investor

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    The issue is in my opinion that the market can change really fast and we just might get stuck with property that we can't sell or rent and that loses it's value, then what?
     
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  5. SteakTartare

    SteakTartare Senior Investor

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    Exactly, Gelsemium. The area my business associated invested in was one of those cities that got hit hard by the housing bust. He liked the area and it is a nice house, but still, no buyers, no value. I'm not opposed to real estate investment, but I do like liquidity even more so.
     
  6. Peninha

    Peninha Senior Investor

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    I agree with that, that is why it's so important to diversify, if for some reason we are having no liquidity from real estate, we get it from other areas.
     
  7. JR Ewing

    JR Ewing Super Moderator Staff Member

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    I also love liquidity.

    Something is basically worth what anyone is willing and able to pay you for it at any given time.

    I have dabbled in hard real estate in the past, but I prefer to keep most of my $ in more liquid assets. You can still buy real estate via publicly traded real estate stocks, REITs, mutual funds, etc.

    One great thing about real property in my area and many others is the possibility of having oil / gas under it. Mineral rights to property can be far more valuable than the property itself in many cases. :D
     
  8. Fredrick Jones

    Fredrick Jones Well-Known Member

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    My problem is I have too many of my assets tied up in realestate. Basically I put approximately 50% of my assets in realestate, and then I kept the other 50% liquid. That 50% I tried to start a business but I made many mistakes and lost that 50%. So now I have the problem that I am not liquid.

    Lesson learned is don't go into business with family or friends, outsource as much as possible, and when you get into trouble don't expect help :)
     
  9. crimsonghost747

    crimsonghost747 Senior Investor

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    Old thread but whatever.
    I definitely agree with JR, as I have said many times before I prefer to do my real estate investing through REITs. You choose the exact amount of capital to invest, you get proper diversification even if that amount is only a few hundred $, you have absolutely no managing to do and once you have done your research you can buy/sell with the click of a button.

    Pretty handy, no?
     
  10. Onionman

    Onionman Senior Investor

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    My timing was pretty bad with a couple of investments I tried. I basically got hurt in 2008 by the collapse of two deals that I chose to pull out of. Had I stayed in I would have been underwater still now I think, though the rental income would have been great in recent years. You live and learn. Until the next bubble...
     

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