Editor’s note: The 10-year run up in real estate values has been one of the most remarkable wealth creators in history. Everyone seems in on the action: first-time home buyers, Realtors, mortgage brokers, office builders, small investors and large corporations. This three-part series focuses on who’s taking a piece of the nation’s real estate riches. (See Part 1: Agents, homeowners capitalize on home-price gains and Part 2: Builders, mortgage lenders at top of housing wealth chain.)

As with the Gold Rush or the dot-com boom, there have always been those in real estate who got in early and built their fortunes with skilled planning or lucky guesses. Their stories are heard the most: rags to riches, newcomer to insider, entrepreneur to profiteer.

Everyone who bought a home 25 years ago, a decade ago or even a few years ago in now-sizzling real estate markets may appear today to be financial geniuses. The nationwide median price of new single-family homes jumped from $24,700 in 1968 to $208,900 in August 2004, a gain of 745.8 percent. Meanwhile, the median price of existing single-family homes jumped from $20,100 in 1968 to $190,100 in August 2004, a gain of about 845.8 percent.

And in the last 10 years, the median price of new homes increased about $78,900 while the median price of existing homes gained about $80,200. In particularly red-hot housing markets, there are reports of home prices that have doubled or better within the past few years. Along with real estate agents and everyday homeowners, real estate moguls no doubt have cashed in on escalating appreciation rates.

This year’s Forbes 400 list of the wealthiest people in America featured a couple dozen people, most of them white men above 60 years old, whose fortunes are based in real estate. Donald L. Bren, who is worth about $4.3 billion, according to Forbes magazine, is an owner of hundreds of office and commercial buildings who got his start as the founder of a home-building company. He ranked highest on the list among real estate millionaires and billionaires, placing 38th on the list of 400 people.

Donald Trump, a.k.a. “The Donald,” ranked 74th on the list. Samuel Zell, the son of Polish immigrants who fled the Nazi invasion, bought up cheap real estate from distressed owners and now owns mammoth portions of office space and apartments. Zell is worth an estimated $2.4 billion and ranked 87th on the list. William J. Pulte, founder of mega-builder Pulte Homes, is worth an estimated $1.2 billion and placed 234th on the Forbes list.

Such real estate giants can make the business of real estate appear to be an easy game to play, though amateur investors lured by quick profits in a hot market can fall prey to bad timing, said Robert Campbell, a real estate adviser and author of “Timing the Real Estate Market,” a real estate investment book. “Most people jump on a trend too late,” he said. “Everybody falls in love with (a hot market) when it’s expensive.”

And many of the success stories you hear about people making big money in real estate are all about luck, he said. “During any five-year period, most of the people who do the best, from an investment standpoint, and make the highest rate of return on assets – it’s a function of just plain luck,” Campbell said.

In parts of Southern California and in the Boston area, for example, “real estate profits have been windfalls – for the people who achieve these windfall profits it has been dumb luck, it hasn’t been investment genius.”

Campbell advises people to “get more liquid” with their assets at or near the peak of the market, and to invest in depressed real estate markets. Denver, Colo.; and areas in Texas such as Austin and Dallas-Ft. Worth, are among his favorite investment markets right now, Campbell said.

Some housing markets are driven by greed, Campbell said, and housing booms in some parts of the country “have fueled irrational booms in other areas.” Las Vegas, for example, has experienced a housing boom that appears to be even more mercurial than the Southern California market, he said.

“When you start to see markets go vertical with rises like that, it’s just a matter of time before the jets fall out and the market comes burning down. It’s symptomatic of a mania – that’s what history tells us. This is not a time in these boom markets to be upsizing. If anything you should be downsizing.”

Of course, there are general strategies that can be applied in real estate to maximize your chances of success. “You buy when the blood is in the street. That little formula has worked miracles. It’s just the opposite of what the average guy does. You want to buy (when there is) ‘panic’ and sell  (when there is) ‘euphoria.’ It’s all market psychology. It’s all fear and greed.”

Billionaire Warren Buffet is known well, Campbell said, for this simple investment strategy of buying when the price is low and selling when the price is high. Buffet’s Berkshire Hathaway is parent company to HomeServices of America, which recently ranked as the second-largest real estate company based on closed transactions and sales volume.

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Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.

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