How NOT to Make Money on Real Estate (And Some Ideas on Earning Extra Cash)

Check out the posterboy for the housing bust. His key stats:

• Casey Serin
• 24 years old
• 6 money-losing properties
• $2.5 million in debt

Here's the SFGate's take on his story:

Taking a page from the no-money-down gurus he had already ruined his credit scores learning from, he didn't let the fact that he was under-employed with no financial assets slow him down. He bought one house at a discount and sold it for a profit of $30,000, which he used to wipe out his credit card debt and bring up his credit scores. The next house purchase wasn't quite so lucrative -- it had a negative cash flow, but this didn't dissuade him. In fact, the negative cash flow only convinced Serin to think he needed more investments "to keep me busy with profit in the pipeline." In January 2005, he took a three-week leave from his job to get "enough deals in contract" so that he could give his employer two weeks' notice.

All proceeded according to plan. He quit his job and in the next four months he acquired six more properties. All in all, his portfolio included eight single-family homes, including two houses in Sacramento and one in Modesto, a seven-bedroom fixer-upper in Highland, Utah, a model home in Rio Rancho, N.M. and five-bedroom, four-bathroom ranch house in Dallas, Texas.

But (surprise, surprise) the profit didn't appear in the pipeline as planned. "I didn't manage my cash flow and the market changed on me," he told me. "I guess I didn't have enough exit strategies."

And here's their summary of his situation:

What Serin reveals about himself is that he's a sucker for every real estate myth that the industry has been feeding us for the past 10 years: that the market will always go up, that if you buy at a discount you're safe from financial risk, that gurus are doling out useful advice for the beginning real estate investor -- and that if you make enough deals, you're sure to come out ahead.

Do I need to say "I told you so?"

This is exactly the sort of get-rich-quick stuff that often derails honest, hard-working, determined people (like Casey). If he had just channeled all that energy into something a bit more positive (and with a bit more experience, learning, training, etc.), I'm sure he would have done much better.

So, what are my suggestions for making money? Check out these posts to get some ideas:

• Free Money Finance Guide to Making More Money

• Turning a Hobby Into a Small Business

• Make Money Selling Coupons on eBay

Comments

[Foobarista]

The good thing is this kid _is_ a kid and has serious huevos. After a rocky period, he'll probably end up rich. He may even write a book!

If he were 57 or something, things would be far worse...

[FMF]

Or maybe he'll become a financial author/advisor. THis is, after all, how Dave Ramsey got started. ;-)

[Duane Gran]

His mistake was leaving the day job, in addition to buying into some real estate myths. It is much safer to build a business on the side and to transition once it is clear that the profits are forthcoming.

[Curly Tree]

I think he'll do well going forward. For his age, he knows a whole lot more than most of us do! I wish Casey luck.

[Special Ed]

"This is exactly the sort of get-rich-quick stuff that often derails honest, hard-working, determined people (like Casey)."

Honest? Hardly. The guy committed all kinds of fraud. He lied on applications about his other loan deals. The guy's full of crap and deserves to go to prison.

[Lord]

Shouldn't we thank him for providing for those who come after him? ;-)