Flipping Rich

Two years ago, everyone was talking about investing in real estate.  Every newspaper and every magazine had articles of “hot pockets” around the country and how average Americans like Derrik who featured in Kiplinger making a small fortune flipping properties.   As a result, Derrik got plenty of calls from so-called investors lacking talent and seeding money with dreams of making billions flipping properties like their cousin’s brother-in-law who knew a guy became a millionaire overnight flipping. Yes, they’re out of their flipping minds but who can blame them.   We all want a piece of the American dream and a little piece of the earth to call our own.  And the markets (whether real estate or stock) are purely driven by fear and greed.   The get-rich-quick mentality is nothing new – just shifts in different directions depending on where the media is pointing.  Betting your money into “hot pockets” or the “hottest mutual funds of last year” means investing with a rearview mirror.   So, what’s new?

Nowadays, it’s hard to avoid headlines of real estate slow down or prices dropping all over the country.  The fact is real estate prices ran up too quickly within a short period of time.  That’s a definite valuation problem. The same applies to the stock market.   The recent market volatility is far from a normal correction.  I’d call it a “hiccup”.  Wall Streets gurus have been warning correction should be expected simply because we’ve enjoyed 5+ years of bull market without any 10%+ correction during this period of time.    Last week’s stock market jitters responding to the Shanghai is nothing short of normal volatility every investor should expect.  The truth is, all financial markets including real estate and stock have inherent volatility and variations in business cycles.   So, now what?

The bottom line is you should stay diversifies with emphasis to something of personal interest.  For example, we have rental properties not because we like chasing tenants for rent every month but the rentals can be a good way to supplement income in our old age.   Flipping rehab’d properties are purely intended for capital gains.  At the same time, we’re aggressively investing into the stock market with our qualified (retirement) accounts.   There’s no telling which market will correct when.  So, stay invested!