Posted: April 01, 2011
Small biz: Cashing in on the crash
Author sees rare opportunity in real estate downturnBy Mike Taylor
The cover of Greg Rand's just-released book looks like another get-rich-quick scheme: "Crash Boom! Make a Fortune in Today's Volatile Real Estate Market."
But Rand's message is surprisingly conservative, based largely on comparisons with the Great Depression and what happened afterward.
"The crises are similar - really this is child's play compared with the Great Depression - but what happened after that was 70 years of appreciation," says Rand, former managing partner at Better Homes and Gardens Rand Realty outside of New York, one of the largest brokerages on the East Coast. "It was an overcorrection, but it set people up for prosperity for a long period of time. The message is, if you're going to buy into the crisis side of the similarities, take a look at the opportunities side because there are similarities there, too."
As another indication of his realistic stance, Rand calls the buy-and-flip model a sucker's bet except for full-time rehabbers who actually add value to properties, and he says it could well be 10 years before the real estate market is humming again.
In fact, his outlook is not much different than what I heard from a panel of bank executives and economists during the Colorado Economic Housing Summit, one of the programs at the "Realtor Rally" held March 8 at the Colorado Convention Center.
At that event, Jed Smith, managing director of quantitative research for the National Association of Realtors, suggested residential real estate is simply returning to its intended purpose.
"Look folks, we buy houses to live in," Smith said. "We don't buy them to speculate. You can probably find blue-chip stocks that provide a better return, but you can't live in a blue-chip stock."
As for a forecast, Smith said, "The NAR is projecting the start of a recovery this year and continuation next year. So I would suggest that 2011 looks like a good year."
Of course, Rand does see home ownership as a road to prosperity, not just a place to live in.
"It's such a phenomenal time right now and over the next couple years to take positions in real estate and wait for the revival," he says. "Which, for all I know is going to be 10 years out. Why would it be any sooner? But we're all going to be around here in 10 years, hopefully, so if you're trying to get wealthy, take positions now and wait."
Rand says "Crash Boom" is his rebuttal to all the pessimism he saw around him.
"It was a crime in my mind that so many people were losing faith in this asset, based on what had gone on over the last few years," he says. "The anomaly here was not the crash of the housing market. The anomaly was that crazy boom that happened between 2002 and 2006.
"The correction was the right thing to happen," he says. "But people were looking at it like it was a freefall or a meltdown or a collapse. Those were the terms that were tossed around to describe it. I felt like it was the right time in history to step out."
So Rand stepped away from his family's brokerage, leaving it to his brothers to run. He founded a company, Own America (ownamerica.com), geared toward real estate education. He also has a show, "Rand On Real Estate" on New York's WABC Radio, the largest talk-radio station in the country.
"The bigger the boom, the harder the crash,"
he says. "The bigger the party, the harder the hangover. All those analogies fit. Consumers are
waiting for a reason to stop being fearful. Investors are looking for a reason to pounce. They smell it,
and they're pouncing."
Mike Taylor is the managing editor of ColoradoBiz. He writes about small-business money issues and how startups are launched. E-mail him at email@example.com.