How to Invest In a Changing Real Estate Market
Posted on April 12, 2009
Filed Under Pre-Foreclosures Investing |
Most people who want to get into the real estate market wait for ideal market conditions to transpire before plunging in. However, in the real world, ideal market conditions hardly ever occur. The key is to understand what your specific market is, and use particular techniques that are required for it. It is necessary to know the area you are interested in investing, and its economic condition. If you notice many houses approaching foreclosure, the local market’s economy needs to be crosschecked.
These situations arise when a large corporation has closed down, or has laid off a lot of employees. This could be the reason why houses in the surrounding areas move towards foreclosure. This factor will also affect property purchases, if that employer is the major source of jobs in that area. Hence, most of these foreclosure deals are not good investments.
If it is a rising market, finding bargains is more difficult. The reason being, that as the market continues to rise, the probability of making huge profits by selling quickly increases. Conversely, more bargains are available when there is a fall in the value of properties.
The real estate market is also affected by the changes in the season. And to be successful, it is necessary for an investor to understand these seasonal fluctuations that occur. For example, compared to the summer, in the winter there are fewer properties that are listed, while in the spring there is a spate in the property listings. Resort areas, for example, are particularly affected by seasonal trends.
Certain stratagems can be successfully implemented in practically all kinds of market conditions. By learning about large-scale trends, you can educate yourself about your local market. Real estate market trends tend to be similar whether it is on a global scale, national, regional, or even in particular neighborhoods. You can learn about the specific neighborhoods you are interested in from real estate professionals who have been successful in those areas.
These professionals are able to interpret and predict market trends by having specific knowledge about the properties in those neighborhoods, such as the average length of time houses have been sitting without being sold in a particular month versus the previous month, or even the previous year. Thus, once you have this kind of information, it will help you in making good real estate decisions.
The inventory is also another factor that affects the real estate market. The term inventory is the number of properties offered for sale at any given time in a real estate market. It is a good indicator of current market trends. For example, if geography or restrictions in building results in a low inventory, it will lead to the rise in the demand for property which will in turn result in an increase in the prices. The inventory is also affected by seasonal fluctuations.
When investing in property, having a clear plan is far more essential than being able to predict future trends in the real estate market. An intelligent investor will know exactly when or how he/she needs to exit from a property, even before buying it. An investor who is even smarter will always have a couple of back-up plans ready, just in case the first course of action fails.
In other words, it is important to be knowledgeable about your market, and to have your plan chalked out, before beginning investment.
Kris Koonar
http://www.articlesbase.com/non-fiction-articles/how-to-invest-in-a-changing-real-estate-market-123406.html
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5 Responses to “How to Invest In a Changing Real Estate Market”
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Investing In Owner Financing?
I am very interested in getting into the real estate market. I had planned to deal with sub prime buyers. However the recent news about the sub prime market has changed my mind. I have an idea, and I am curious what some real estate people think about it! I have the credit score to be able to invest in real estate properties. I am thinking that I can finance residential properties, and then turn around a finance them myself to a buyer via a contract for deed, or something similar. I am figuring I can clear $150-$200/month per property.
Here is what I think are the benifits…
1.) I don't have to maintain the property like I would if I rented it.
2.) I get a down payment so the buyers are more likely to stay in the house, and should have a lot higher retention rate.
3.) I build a residual monthly income.
4.) If I do take back a house, I refinance it for another 30 years
5.) The buyer will be responsible for all taxes, insurance, etc.
So what do you think? Good or Bad Idea
I think the people would be more likely to stay as they would be buying the house, and they would have an initial down payment tied up in the house.
Personally if I have to take back the house thats fine, I just don't want to do it every couple of months like with renting…I think doing it this way most people would stay in the houses 5-7 years before they default.
I know my uncle made millions by financing land like this in south georgia.
I also think it comes into investigating the people your selling too, check them out and make sure they half way decent people with a good job history. I also plan on staying with the lower end houses to start with, so I don't have so much tied up in each property.
But, please keep the opinions coming…and thanks!
so you find some owner that does owner financing, you give him a down payment of whatever, 5% lets say, you are the owner, you turn around and try to sell it to someone else, for more money of course take their down payment, and put it to another house, rinse and repeat a few times, i think it all depends on what contract you get from the owner if he allows you to sell it, i heard of people doing this and was thinking of doing this myself, let me know what you do if anything , curious to know
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The first problem is the bank is not going to like it if you try to deed the property to a third party… its a good way to end up in court…. it will be a violation of your loan.
The second problem is there is enormous risk in doing this. If you dont keep these properties with someone IN them, you will lose your shirt. 1 month's interest is equal to 5 months profit….
The third problem is you are dealing with people the bank wont touch… these are people that have a history of not paying their bills…. and you are going to give them a loan that costs them a lot of money…. probably more then they can afford. Your "product" will be expensive to them.
The forth problem is your interest rate on anything besides your primary residence will be higher… and you will have to pass that rate on.
The fifth problem is when people are getting evicted…. they tend to destroy the place. You will lose MORE money here.
The sixth problem is the falling housing market could get you stuck with a lot of upside down properties.
The seventh problem is your tax situation would be very complicated…. a CPA could give you more details here.
So, yes, as you know, this is a very risky business venture. With great risk comes great rewards… that is what business is all about… but I think with current market conditions, current prices of houses, and everything else, there is just too much risk. If you required a large down payment (at least 30%) it would be a lot better… but these sub-prime borrowers do not have 30% to put down. And if they did, they could cut out the middle man (you), go to a bank, and get a descent loan there.
This *could* work, and it could be easy money if everything falls into place and you get good "buyers"…. but I think there is more risk then possible rewards.
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You should consider buying the properties subject to the existing financing thus using other people's credit and other people's money. Then lease option them.
Research it if you are serious about investing.
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Good Ideal………
2 out of 7 you will probably get back by owner financing.
Thats how you make your money.
Always make sure they have a good down payment,
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