Book Review: Crash Boom by Greg Rand

The publishers of Crash Boom were nice enough to send me a review copy of the book.  The premise is that the Real Estate market is majorly cyclical and if you pay attention when the bottom is forming in the Real Estate market and you want to be a buyer.  He basically reviews the last 3 Real Estate cycles and points out that the lows are not as low and the highs get higher each cycle. Therefore if you can buy Real Estate at these prices you can expect to see prices rise above the highs of 2006. Another important correlation he points out is the DOW Jones Average and the US Housing Market: if you have been paying attention, the DOW Jones has been going up in the last few years and the Housing Market has not been moving at all, and in some locations has still been dropping. In the last 40 years the overall correlation between these two Markets (the DOW and the Housing Market-see page 89) is significant, therefore Greg states, “when we get our next economic boom, the revival of housing values will come” (page 88).

Greg spends the first half of the book explaining how even in the Great Depression, owning Real Estate was always better than not owning Real Estate. Holding Real Estate for the long term has always been a formula for success and most family wealth has been accumulated by purchasing Real Estate and keeping it in the family for many generations. Real Estate plus time usually equals success.

Right now Greg believes we are in the phase of “irrational pessimism” (page 59) caused by the wave of foreclosures, but that is the Crash phase of the cycle and the Boom phase will follow. At these prices people should buy single family houses and become landlords. There are “6 million people who went from being owners to being renters” (page 64). “The stars are aligned to make this the best time in modern history to be a landlord” (page 65).  He explains how the typical housing cycle last for 12-15 years and what happens during that time is quite predictable.

This book is a call to action in which Greg breaks it down into a simple formula. “First, the market is finding a bottom and the cycle will get ready to reset all over again. Second, you are aware of it at an early point, and third, you have plenty of time to get your assets in gear and make an investment” (page 83).

If someone would have told you two years ago to buy Google or Apple shares because they knew what value those shares would be priced at today, I am sure you would have invested as much as possible. In essence Greg is telling you that the housing market prices will go back or above 2006 levels so just find a method to hold as much Real Estate as you possibly can, knowing that you will have to hold it for 5-10 years. In the meantime, being a landlord will be as easy as it has been in any modern time, therefore you have to plan your success formula with this in mind. Simple, ride the cycle up. The Crash has occurred and the Boom is coming.

Why are people that know that the Housing Market has bottomed not buying real estate. Greg tells us that there are three reasons holding people back. “1-I don’t know how. 2-I don’t have money. 3-I don’t want to be a landlord.” Greg does not spend enough time answering Reason #1 but directs his readers to his website “OwnAmerica.com”. Reason #2 is answered much better and Greg points out that over 10 trillion dollars are currently held in IRA’s, those that can tap into this source of funds will have a direct path to success in Real Estate. In answering Reason #3, being a landlord one must view the tenant as a customer.  Once you view your tenant as a customer you will view being a landlord as a business and you will become more professional.

My Personal Take

The book really reinforces my existing shift in focus from retailing to holding properties.   My business plan is to own as many positive cash-flowing properties that I can afford without overleveraging myself.  If we make it near 2006 prices (the peak in California) I will be very excited and probably sell almost everything.

I am not sure the America in general is ready to be positive about residential real estate yet, especially when talking about appreciation but I think this is a good read for an experienced investor or someone just thinking about getting started in real estate.

Even if you can just dig in, keep your job and buy 1 property a year… in 10 years if we see appreciation that will be life changing money.

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One Response to “ Book Review: Crash Boom by Greg Rand ”

  1. Interesting points, I have two thoughts, I think if fannie and freddie get disolved, we’ll see prices in areas where there is high land value (LA, OC) drop closer to the cost to build the home as financing will much more difficult to obtain (no more 30 yr fixed). Second point is that the housing market is going to come back – it has to. The reason I say this is that we are buying properties below the cost of replacement. Once all the excess REOs are off the market, housing prices will have to reflect the true cost to build. The rate at which commodity prices are soaring due to QE and demand from emerging markets – china, india, etc. will cause the cost for lumber and other building materials to continue to increase, thus increasing the value of homes.

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