Is it true that THE PYRAMID SCHEME we call HOUSING, really a PYRAMID SCHEME? (can I still get rich from it?)?

Hi Everyone ! I just read that the current housing market is in a bubble, because since about 2003, houses were bought in similar ways to a Pyramid Scheme ( http://dadtalk.typepad.com/dadtalk/2008/02/understanding-t.html?ref=patrick.net ) Is this true?? I heard on the radio that the best way to get rich for common folk was to buy a house, rent it out for what you pay in mortgage (plus 10% for taxes, etc), then after it appreciates 10% to 20% the next year, re-finance it and take the extra cash as a down payment on the next house. Keep doing this for the next 30 years and you will have 30 houses to retire on. It seemed good, and it was on a financial investment advising radio station so they know what they're talking about. They were not selling books or anything, just giving out free advice. Has anyone tried to rent out their houses for the same price as they were paying for in rent ?? If you bought a house with a $1,400 mortgage, was it easy to find renters willin to pay $1,600? I know that the U.S. market is falling but I think that Canada is a much MUCH smarter country that STUPID AMERICA, so our prices will probably continue to keep rocketing upwards. I've got $20,000 saved up now and I see a nice 3 bedroom rental house down the street going for $268,000. I was thinking of buying it and then renting it out. I don't want to wait too long because after all, I want to get rich just as much as anyone else does !!

Public Comments

1. Of course you can make money from renting property. But you have to consider that it is like a side job, and when there are maintenance issues, problems with the house, problems with tenants not being able to pay rent, you are ultimately the one responsible. It isn't like getting free money, and if you own 30 houses that you are renting out, more than likely that will be your full time job. If you want to deal in real estate, consider taking a class on it or looking into it further. It isn't an easy money opportunity. Keep that in mind.
2. For every successful house flipper, there are thousands of people who lose their azzes, either due to bad choices, or just pure bad luck. You can still make a lot of money doing it - but you should always have something to fall back on.
3. I say go for it! It will be really easy to find someone to rent a house for more than it costs to buy it! And don't worry about people not paying rent when they owe it, trashing the place, breaking the lease when it suits them. If it takes 3-4 months to find a renter or another renter, no big deal! The bank will understand! They won't expect to be paid for those months either. Hey, you heard it on the radio so it must be true! 10-20% appreciation every year will continue forever! No worries! After all, You are a smart Canadian! Nobody can pull the wool over your eyes!
4. Just think about with simple economics. 1. If it really was that easy why isn't everyone doing it. You have to basically assume that all the people in your surrounding area with MBAs and degrees in finance are so stupid they wouldn't see an easy arbitrage. Called efficient markets. 2. You have to assume that people are also so dumb that they would pay more to rent than to own. Now granted there are people who do because of job or educational circumstances but these are few and far between and certainly not enough to make you a real estate mogul. Good luck with it.
5. I'm not sure but if your looking to make money you should do what I'm doing and get benefits all at the same time. This month is the month to get started.
6. Buying and renting is one way to do it, if you have alot of money for repairs, cleanup and holding costs after the tenants go. AND FYI NEVER NEVER PAY RETAIL FOR A HOUSE.
7. Alright, before you strt doing this you need to get a lot of financial and real estate education. I'm a Real Estate Investor in the USA (CA to be more precise). I spent months learning the in's and out's of real estate before I ever bought my first property. There are lots of ways to make money off of real estate; cashflow, appreciation, depreciation, wholesaling, and flipping to name a very few (but the most common). While I forget the exact number 80%+ of the wealthy people world wide (especially in the USA) have invested in Real Estate. As for it being a Pyramid scheme, I think you need to check your definitions. Pyramid scheme refers to a person at the top collecting money from sales or dues of each person below them. In fact, no matter where you are on the pyramid, if you have people below you, you get a cut of any sales they make. Pyramidal structing of real estate is quite different. Equity from property 1 allows you to buy property 2. A while later equity from 1+2 allows you to buy 3+4. Equity from 1-4 allows you to buy 5-8 and so on is called leveraging existing assets. It's the same if you're buying stocks. You spend $1000 to buy 100 shares at $10. They go up to $15 and you sell them Now you have 1500 which you invest in another $10 stock. It goes up $5, now you have 2250. So on and so forth. As for your house down the block: What are rents in your area? What percentage down are banks currently asking for? Taxes on the property? Insurance? Corporate structure to buy the home? (don't know what this is? well you'll have to learn it pretty darn quick) As for why people say "if it were that easy, everyone would be doing it," I say no, they wouldn't. Most people are too lazy Most are too scared Most don't know enough to be profitable at it If you were to take all the wealth of the world and redistribute it equally to every person, within a decade, we'd be right back to where we're at now, with 10 percent of the population owning 90% of the wealth.
8. slum lord