Friday, April 08, 2005

Investment clubs fuel housing boom

But is it a sign of a bubble when people are buying homes as investments?

by Bertha Coombs
He's a roofer. She owns a hair salon. Now, Paul and Caren Matera are using their entrepreneurial skills in real estate. They bought and sold a little bungalow on New York's Long Island for a 50% profit.

"We closed in July when we purchased it and it was sold at the end of September," says Paul Matera.

The Materas took the plunge after attending a real estate seminar that cost $3,000. They took equity from their home and invested in half a dozen properties that are now worth more than $1 million.

Much of it was preconstruction properties in red-hot Florida developments.

"Sometimes it's not necessary for you to close on your property," Matera says. "A builder will allow you to assign your contract to another buyer. In other words, you would sell it to another buyer in between the going rate and the rate, the price, that you paid for it."

Setting a record
Hard statistics are tough to come by, but one in six purchasers surveyed by the California Association of Realtors in 2004 said they were buying a home for investment or tax purposes. That's a record 16.2%.

All this may be why membership in real estate investment groups like EmeryNet in the San Francisco Bay area is booming.

Members share strategies and leads on finding properties and get expert advice from guest speakers on financing. But most of these Californians are looking in booming areas beyond the Golden Gate.

"We can buy lower outside California than in our own hometown," says Tessie Cuy.

"The Sunbelt areas, that's where I go, Florida, Arizona and Vegas," adds Doug Boggs. "That's were everybody else is going, too. It's kind of like the stock market, really."

A lottery ticket
And that's what worries William Poorvu, a former Harvard Business School professor and author of "The Real Estate Game."

"If you think you are just buying a lottery ticket and putting down the amount of money you are willing to lose, that's one thing," Poorvu says. "If you're investing your savings in something like this, I think you are making a mistake."

But so far Paul and Caren Matera have had no missteps. That's not to say the roofer isn't losing sleep over retirement dreams.

"Every time you close on a deal, you lay in bed worrying at night, absolutely," he says. "Personally, I do." His wife, meanwhile, "sleeps pretty sound, while I'm laying there awake."


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