Thinning The Herd: Why Speculators Are A Dying Species

The National Association of Realtors reported late last month that sales of investment properties fell almost 30 percent last year from a record 2.3 million investment sales in 2005.

Are investors heading back to the stock market? No, but speculators probably are. The white-hot 2004-2005 real estate markets combined with a boom in guru education created a dundering herd of zombies roaming the land with pre-approved loans in hand, “muddying the waters,” as one analyst put it.
“Let’s talk about the difference between investors and speculators,” an agent sighed to me once.
Investors do their due diligence, have clearly-defined goals and strategies, and are prepared for the long haul. (Even flipping won’t make you rich overnight.) Speculators expect to throw a dart at the map and be partying on Tommy Vu’s yacht (“Do you tink these girls like me? NO! They like my money!”) a year after buying a tract home in Riverside.
How to buy toilets wholesale for a six-plex, taking calls from tenants at 1 a.m. when the air conditioning is frozen because they haven’t changed the air filter in eight months – somehow these aspects of real estate investment get overlooked in the seminars. They’re also overlooked in the books and tapes sold at the back of the room.
I suspect that’s the story behind the NAR’s study. The herd is thinning. The wise investor may want to circle around and see what can be picked off.

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