Real Estate history set to repeat itself

[Ray Johnson]

First off, I’m a true believer in the saying “If you have a dream in life, you should seek and follow the path to obtain it!”

In late 2006 we saw the real estate bubble come into play and wreak havoc on the housing industry. The main focus of the cause was targeted at the financial industry for its relaxed lending requirements, banking regulations, and “predatory” lending practices. Most people seem to avoid the conversation about all the Real Estate risk takers that played the biggest part in the housing crisis.

A few years before the bubble burst I was encountering real estate investors, house flippers, and buy-and-hold participants everywhere I went, my waitress at The Cheesecake Factory, the two McDonalds employees talking deals on their lunch break, the clerk at the grocery store, everyone everywhere appeared to be a real estate investor in one form or another getting a piece of the housing boom.

The underlining problem I noticed was during the rush to get into the RE industry most of the people capitalizing in the industry never learned the basics of RE investing and were simply doing what their friends, neighbors, coworkers, or online postings told them to do to get a piece of the pie. A majority of all those RE acquisitions were closed without basic RE fundamentals as part of the deal causing them to play a major part in the housing crisis as they were not structured properly and/or in fragile portfolios that quickly crumbled with the first sign of trouble.

Flash forward 10 years to 2016, minus the banking industry’s participation, we are seeing the same industry practices that played a major role in the last bubble. I’m encountering wholesalers, real estate investors, house flippers, and buy-and-hold participants everywhere using the same knowledge base that played a part in the last crisis.

Here’s why I say history will repeat itself. An example can be found in the BP community when there’s not one day that goes by that I don’t see a post along the lines of:

“Help, I have a property under contract, I need help with the next step”

“I have a house under contract, what’s the best way to get financing?

"I got a cash advance on 5 credit cards for the EMD, I need help with financing the deal"

We’ve all seen these post and there are some far scarier than these. While I would never discourage anyone from trying to close a deal, I’m simply pointing out the similarities of 2006 in which the industry was saturated with far more uniformed participants trying to get rich quick than those who know what they’re doing when structuring deals.