While things were going well, they drew $119,000 out of their real estate transactions and another $100,000 in a home equity loan, presumably for lifestyle spending. This left them with no cushion when business turned against them.
If they had simply reinvested their profits in their real estate transactions and not taken out that home equity loan, they would have a quarter million dollar cushion to break their fall.
Moral of the story is that for 99% of the people real estate is someplace to live, not an investment. This expense must be handled very conservatively and minimized at every turn, because the amount of money can swamp the careless quite easily.
This used to be common wisdom, and every first-time home buyer was warned about this by pretty much everyone they talked to. Somehow this common wisdom was lost. It looks like people are figuring it out again.
This reminds me of the "dot com boom" meeting online trading.
At time when investment cash was thrown at anyone making a website about their intuitive cat, a good number of people that I knew began to fancy themselves Wall Street wizards.
And a short time later they stopped boasting about all that easy money
It's greed, trying to make a quick buck
I don’t think they pulled much out of the real estate other than the 2nd loan. Figure they spent 6% on each sale for commission (~40K). They also had closing costs associated with each purchase (2-3% on a total of $1.03M in 3 purchases). It certainly wasn’t $119K they pulled out.