Friday, October 1, 2010

Lots of Illiquidity

I have been seeing advertisements for the sale of real estate unimproved residential lots at distressed prices. Danger! Danger! Did you know that once you buy the lot, you cannot ever refinance the loan? Did you also know, that you cannot borrow against a lot if you pay for it in cash? There is no real loanable value until you build a house on the lot. I bet you did not know these facts, did you?

You know how I feel about liquidity. You need lots of liquidity, not lots of illiquidity. Get it...lots of illiquidity?

Residential real estate lots are totally worthless unless you have a loan or cash in hand to build your home on the lot immediately. Otherwise, do not tie up your money. If you are not ready to build on that lot, then wait until you are ready to build on the lot.

I think I will add this to my Do Not Buy List.