Cont..An investor's $204,000 mistake (Part 2)

"Learn from the mistakes of others. You can't live long enough to make them all yourself"

              -Eleanor Roosevelt US diplomat & reformer  (1884 - 1962)

" In the stock market, history repeats itself. This is because human nature rarely changes"

               - William J. O'Neil (Founder of Investor's Business Daily)

                             The 1990's California Real Estate Crash

Prior to construction in early 1990, the possibility of failure never crossed my mind.  The eight homes I was building were appraised for $2.2 million in 1989.  However, by the time all the homes were built and sold in 1991, the total sales price of all eight homes had dropped to $1.8 million. In other words the average value of each home had dropped from $275,000 to $225,000 in less than two years!

This market downturn caught practically everyone by surprise- including the so called 'experts'.  It was the worst real estate crash since the Great Depression. Home prices plunged by 25-40% during the next five years.  Land prices fell as much as 60%! Many real estate owners lost everything.  Even those that survived the 'crash'- and avoided going broke- still suffered huge financial losses.

Personally, I lost $204,000 of hard-earned capital.  I also lost over three years of time during which I earned absolutely no income from all my hard work and had to live off my savings.  The loss caused from building these eight homes,coupled with the huge loss I suffered from my two vacant land partnerships mentioned earlier, caused a negative and far-reaching ripple effect.  It created a major financial setback that would take me years and years to overcome.

However, after witnessing and surviving this real estate lapse, I did learn a valuable lesson.  I learned that working hard was not enough to be successful in life.... or in real estate.  It is more important to work smart.

To be continued...

Resource: 'Timing the Real Estate Market' By: Robert Campbell pages 42-48