Hey guy's...Sorry is this is way off topic Ok, i do not know a huge amount about real estate, but i know some. Anyways, someone i know wants to get into real estate and he just told me he is going to buy a 600k house when he sells his 235k house. Since he only makes like 50k a year i ask him how the hell is he going to pay for it, and he said the market will keep going up (Live in Nanaimo, BC, Canada) So i asked him "what if it goes down" he said it wont, it can't...Sure the market is doing good where i live, but will there be a point to which the market will top out? I went on telling him about risk management and i could not back my self up because i cant really apply it to real estate. Please tell me how i can tell him that the real estate market does not ALWAYS GO UP!
In the early 90's many parts of the country experienced 10%+ declines in real estate prices. How soon people forget! It can and will happen again.
Tell him NOT to apply for an ARM. Tell him to get a 30yr fixed w/ 20% down minimum. This is relatively safe but I don't think he will be able to afford the payments at 50k/year salary.
Tell him good luck and you wish you had his balls. If you try to talk him out of it, he'll just resent it and if it turns out that he would have made money, he'll never let you forget it. Realistically, what's the absolute worst that can happen? He loses his down payment and has to declare bankruptcy. BFD, unless he has substantial assets. Considering his salary, I'm assuming he doesn't. A lot more people have gotten rich in real estate than anything else. It's a risk, but it's not like they take you out and shoot you if it doesn't work out.