I could count on five pairs of hands the people who have told me that there is no way to lose when it comes to investing in real estate. The most emphatic are those individuals who for whatever reason have had very little formal education, and yet some bright people also tend to think this way. It reminds me of the 90s when everyone was gung-ho on stocks. In the “new economy,” everyone who played the game would be rich—at least on paper. This attitude has been proven wrong before; it will be proven wrong again.
All along I’ve been saying there’s as much risk, or more, investing in real estate than there is in stocks. While real estate has never gone down as a whole since the Great Depression, when you buy a house you’re not investing in real estate as a whole. Sarah Max from CNN supports my view and sees a bubble. No one knows when it will pop, and when it pops, I imagine it will pop at different times in different locations.
Be smart. Remember the three tenets of investing in real estate (or in anything): diversify, diversify, diversify.
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As far as real estate being as risky as stocks, I believe that one has better resources to find special situations that can result in higher returns without increasing risk or reduce risk while maintaining returns comparable to stocks. As for those who believe that there is nothing to loose, thank you for providing an endless supply of special situations.