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Financial Advisor Says “Know When To Fold ‘Em” When It Comes To Real Estate Investing


Over the past couple of years real estate prices have declined sharply, to the point where many people are now talking about whether it makes sense to start buying real estate as an investment.

Dennis Tubbergen, one of the country’s financial advisors to advisors, thinks otherwise. As he discusses in a recent post on his financial blog, it is his belief the market still hasn’t hit bottom.

Country singer Kenny Rogers says, “You got to know when to hold ‘em, and know when to fold ‘em” - and for now, Tubbergen believes it’s time to fold ‘em.

A study by Credit Suisse estimates there will be 8.1 million foreclosures in residential real estate between 2009 and 2012. In addition, an estimated 63 percent of subprime borrowers will owe more on their homes than their homes are worth by the year 2009, according to the Credit Suisse report.

Stories like the following may become more widespread:

Gary Watts, chief prognosticator for The Orange County Association of Realtors, bought a house in Rancho Santo Margarita in 2005, putting $77,000 down on the $765,000 property.

According to the Orange County Register, Watts recently defaulted on the loan because the value of the house has dropped 22 percent below the original purchase price not because he couldn’t afford to make the payments. He stated defaulting on the loan was more of a business decision.

All across the country, homeowners are facing the same situation. Should they keep the house as its value sinks lower and lower, far below the purchase price?

And the real estate crisis has not spared the commercial real estate market either.

David Henry, president of U.S. Based Kimco Realty Corp, was quoted in a Canadian Press article recently, saying that this year may be a lot worse for commercial real estate, because property owners are finding themselves unable to pay off their debt, and unable to refinance their loans.

A typical example is the foreclosure sale of the John Hancock Tower in Boston. The property was purchased by Broadway Fund Managers, LLC, in December of 2006 for $1.3 billion. It was sold to its new owners for $20.1 million, and the new owners assumed an existing $640.5 million mortgage that was already in place. This represents a 40 percent drop in value - in only two years time.

So for those who are wondering whether the time is right to invest in real estate, Tubbergen believes, the bottom line is – it may be time to fold ‘em.

Advisory services offered through USA Wealth Management, LLC, a federally registered investment advisor.
The opinions expressed herein are those of the writer and not necessarily that of the above noted company.
This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause actual events or results to differ
materially from those that were forecasted.

Investing involves a risk of principal loss. Prior to making any investment decision, the services of an appropriate professional should be sought as investment related recommendations are dependent upon the personal financial situation of each individual investor.


 loan defaults
 commercial real estate
 residential real estate

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