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Saturday, February 26, 2011 7:12 PM

Real Estate Emails from Arizona and Florida: Should I Buy? Is this a Scam?

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In response to Interactive Map of Case Shiller Home Price Drop from Peak; Reflections on Flying Monkeys I received questions from readers regarding real estate in Arizona and Florida.

Phoenix Email

Reader Ron is from the Midwest and asks about Phoenix...

"I am very interested in the Phoenix housing data, however given the commentary below I cannot tell either context or time frame. Is Phoenix improving or declining? I cannot tell from your article. Can you elaborate in terms and time frame that would explain?"
Hello Ron

Phoenix may easily be close to the bottom given that massive drop.

However, I would not expect significant appreciation for years even IF Phoenix is at the bottom. That holds true for any bottoming area. I think parts of Florida have probably bottomed as well, but prices could easily stagnate for a decade.

In general, the last bubble is not reblown for decades. Look at the Nasdaq or better yet, the Nikkei.

If you are thinking of moving to and living in Phoenix, I believe the worst of the decline is over. However, if you are thinking about the rental market, you need to be very careful if you do not know what you are doing.

Please see Phoenix Property Scam Targets Australian and New Zealand Buyers for details. I strongly suggest not attempting to manage property from a distance.

Florida Email

Stuck-In-Florida writes ....
I own three residential home properties in Orlando that I bought in 2006, and obviously over held them and they are now all worth half the price. I have had many problems with leasing them out due to many people moving in making the place a mess and leaving due to personal financial problems!

I cannot figure out what to do with the homes now because the options are to lose half my investment or ruin my credit. I do not like either option.

Recently I have been contacted by a gentleman that lives in the area and he found 3 year lease to own (option to buy) tenants for two of my homes, I read over the contract and they are very attractive, 3 years contracted tenant, and an option price at the end of three years at the price of the peak in 2007 or double the price of the home now.

Is this a scam for me as the owner or is this a scam for the tenant, or both ways? Let me know if you know anything about this?

Hello Stuck...

I cannot answer your question directly but I may be able to help.

For starters, I am suspicious of "offers to help". Moreover, I do not know Florida law or any specific Florida pitfalls, nor can I (or would I even if I could, attempt to sort out a legal contract for anyone).

Secondly please note what I said to the potential Phoenix buyer above. Even IF this is the bottom, do not expect rapid appreciation, perhaps any appreciation. In real (inflation adjusted returns), I expect real estate to be a poor investment for as long as a decade.

Do you really want to be a landlord?

Even if you do, my advice is simple and easy to understand: Before you sign anything or do anything please consult with an attorney for your state.

You may wish to consider walking away, or you may want to go ahead if an attorney reviews what you have in mind. Again, I am very suspicious of "offers to help". Perhaps that offer is not a scam, perhaps it is.

I do not have legal contacts for many states. In fact, I happen to have a contact for precisely one state. That state just happens to be Florida.

Please read Before Walking Away Consult An Attorney for information about walking away and the name of a Florida attorney specializing in real estate problems.

Tell him Mish sent you. I get nothing out of this. I am just trying to help. Good luck to you.

Mike "Mish" Shedlock
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