How to short real estate - by Garth Turner

[bestplaceonmeth]

Will any of this work?

http://www.greaterfool.ca/2009/08/14/by-the-shorts/

How do you make money from something in bloat?

Several ways.

In the stock market, for example, you can short a company whose shares have climbed beyond reason by selling short. That means unloading equities you don’t actually own, by borrowing them from a broker, in the hope of buying them back in days, weeks or months at a cheaper price. The difference in what you got for selling it today and what you pay later is the profit.

But how do you short the housing market?
Bubble Buster # 1

Obviously selling real estate you own at the top of the market (that would be just about now) is a way to realize capital gains. Then short the market by buying back in later at a lower price. In fact, if you were to sell today in a bidding war you’d be able to get any closing date you wanted in an unconditional deal with a serious non-refundable deposit (make that a condition of the sale).

Demand a long closing of, say, next April or May.

One of two things will likely happen: (a) the market will have crested, giving you top-of-the froth sale proceeds with which to buy a new house. Or, (b) the buyers realize they made a horrible mistake and paid far too much in the middle of a bubble, and don’t close the deal. Sweet. Then you get to keep both the house and the serious deposit (and here I’m thinking fifty large on a 400K property).
Bubble Buster # 2

Alternatively, you could sell a property at the top of the curve, get a guaranteed tax-free high yield on your sale proceeds, and quite possibly reclaim the asset, along with pocketing opportunity money at the same time.

Let’s say you have a mortgage-free property that could fetch $400,000 – again, likely in a bidding war. Being a seller’s market, you’re in the driver’s seat and can insist on a large deposit which is non-refundable (BTW, the real estate agent will fight you on this, but tough).

Now, offer the buyer an attractive vendor take-back mortgage – five-year term, completely open, at less than bank rates. In fact, banks don’t even offer long-term, open loans, and the one-year open is north of 6.5%. So, an open fiver at 5% is a great deal for the purchaser.

Insist on 20% down ($80,000), and a VTB of $320,000 – which will give you a monthly income of $1,860, or $22,332 a year. And it’s tax-free, since it’s flowing from the proceeds of your principle residence. In other words, you have taken your over-valued property, put eighty grand in your pocket, and created enough cash flow to rent a similar home – secure in the knowledge that you’ll still get your $320,000 back in (at the most) five years.

But what happens if the housing market collapses and your buyers find themselves underwater, with a house worth less than $320,000? What if they walk or default on payments?

No probs. Put the house under power of sale or foreclosure. You get the option of selling it again in the open market (and keeping the cash you’ve already collected), or putting it back into your own name. Plus, you have the right to sue the poor buggers for missed mortgage payments, legal costs and any shortfall that might occur between the mortgage amount and a sale amount – no matter how distressed the market might be.

Getting a judgment would be virtually automatic, or just regain title and move back in. And you’d be $80,000 wealthier than you were before, without having had to invest any money.

[tqn]

this is b.s. how many places has he tried?

[Johnny Horton]

He is on meth.
What a meth.tard.
If he was so f*ckn' smart he would be doing it and he would be rich.
But no, he's just whinin' and cryin' and poor....P.O.O.R.

or should we say POO-R.

Quit wasting chip space with your drug incited posts.

If you want to short the market, why don't you do like VancouverHousingBooger?
He tells himself he's gonna buy but doesn't. Then as the market goes down he tells himself he's actually getting richer.
He is lollygagging his was to independent wealth by not doing anything. Or at least, that what he tells himself.

I think denial and some meth will do wonders for your financial health. Give it a try.....hahahahahahaha

[hazuchan]

How can we short Garth's book sales?

[tqn]

How can we short Garth's book sales?

marketing it to the greaterfool.

[BeatBox]

I stopped reading when he mentioned asking for a long closing date beyond any reasonable expectation. I thought his web address was in reference to the old adage of the next buyer in a bubble market... but now I know it is his own personal nickname.

[Johnny Horton]

[bestplaceonmeth]

I stopped reading when he mentioned asking for a long closing date beyond any reasonable expectation. I thought his web address was in reference to the old adage of the next buyer in a bubble market... but now I know it is his own personal nickname.

Regardless, I would still take Garth's advice over Ozzie Snake-oil-saleman any day.

[Johnny Horton]

Have you ever heard Ozzie's advice?

[pianoexcellence]

I think most of this stuff is really unrealistic...it sounds nice to bears but I'm trying to imagine it in practice.

What tax free investments are you talking about where you can plunk down 300k?


I say just sell what you have, and wait to re-buy in at a lower price and keep building your tax free PR, equity. If you don't own, as I assume meth does not, and you have money, then find an investment you are happy about, and go for it.

What Garth is suggesting is most certainly not "shorting" at least in a technical sense. I'm picturing RE shorters being "short" the rental revenue too if you actually shorted an investment property and sold it.

I can't see a really good way to actually short RE, although I suppose you could do well making "escrow" bets with people and it would have the same net effect.

[eyesthebye]

I stopped reading when he mentioned asking for a long closing date beyond any reasonable expectation. I thought his web address was in reference to the old adage of the next buyer in a bubble market... but now I know it is his own personal nickname.

Regardless, I would still take Garth's advice over Ozzie Snake-oil-saleman any day.

not surprising - Garth is a bear and Ozzie a bull. But when you hear Garth's message he's really just preaching to the choir.

[grantness]

Why do people keep posting Garth Turner articles? The guy is a joke, and an embarrasment to bears.

[wealthyboomer]

Why do people keep posting Garth Turner articles? The guy is a joke, and an embarrasment to bears.

Entertainment Value!

[ponzi]

I've seen bubble buster 1 & 2 done before.... more realistic than you think.

[Greenhorn]

Garth Turner is a friggin idiot!!!

Insist on 20% down ($80,000), and a VTB of $320,000 – which will give you a monthly income of $1,860, or $22,332 a year. And it’s tax-free, since it’s flowing from the proceeds of your principle residence.

What a load of crap. If you sell your house and invest the proceeds and earn income, you pay TAX!!!! What a friggin idiot.