09/01/2009 05:12 am ET Updated May 25, 2011

I Keep on Singing the Same Song

"What's your profit going to be? Who will it come from, and how much will you see?" is the chorus of the song I keep singing to my clients. In counterpoint they croon a different tune: "Houses are cheap, that's what they say, if I don't buy now I'll rue the day."

While I am not actually performing the role of the real estate attorney in my own personal operetta, I am increasingly making a pest of myself to the other players on this stage. I frustrate clients and irritate colleagues by singing the same showstopper at every performance: "What's the plan for the profits you seek? How will you make money in a market that's weak?"

When one colleague boasts that he's busy with clients buying up empty condos or chunks of blighted neighborhoods, I ask with genuine curiosity how and when these investors are planning to recoup their outlay and turn a profit. In reply I get a shrug and a "who knows?" When I inquire of another attorney retained by speculating buyers how these 2009 investors intend to avoid getting burnt like those currently in foreclosure, I am told "with prices like these, the deals are too hot to pass up".

I don't want to see the mistakes of the past repeated by those I have been hired to protect, so I regularly sing my song to those gathered around my conference table. These clients have already extricated $150,000 or so from the rapidly diminishing equity in their homes, and their plot lines rarely vary: they want to use the funds to buy houses in the low $100s that sold for at least twice that amount a few years ago. Some clients want to transform totally trashed houses, turning a profit "when the market rebounds." I see how uneasy they get as I ask what they've budgeted for materials (and labor if they're not handy) and how much of their savings they'll have to deplete while the houses sit unsold. Do they realize that the very market that made it easy for them to find such "cheap" houses might very well continue to drive prices down, or at least hold things so steady that any substantial gain on their investment might be many years away?

Others seeking my representation are confident they can refurbish a pile of rubbish (barely) surrounded by four walls and a roof and yield a monthly profit by renting it out. Do they have the funds to fix-up the fixer-uppers without further dipping into their first home's equity? Have they calculated the costs of being on-call caretakers to tenants with no cares or concerns about what gets flushed down the toilet or goes up in smoke in the fireplace? Are they not deterred by the glut of unsold houses and condos shifting into the rental market, driving down monthly returns from those lucky enough to find credit-worthy tenants? And for those desiring government-backed leases, have they considered how fast cash starved administrations are cutting out aid for the poorest?

I can both see and smell the flop sweat by the time my catastrophic caterwauling is concluded, so I quickly break the mood. I tell them that I am absolutely not trying to dampen their enthusiastic plans to make the most of their money, but as their counselor I just don't see how borrowing cash from their current abodes to plunge into sinkholes disguised as houses will have a profitable ending. To those clients undeterred by my gloomy crooning, I then offer them reassurance: you don't need your attorney to be a visionary; if the current wave of speculators transform into the smart investors of the future by yanking the real estate market out of the doldrums and re-establishing it as a business yielding realistic returns, I'll be very happy to change my tune. And when my audience stands (rarely for an ovation, but merely to leave), I conclude on an up-note: "I hope I'm wrong! I truly do! I need to pay my mortgage too!"