2008! It was the best time to buy real estate, it was the worst time to buy real estate. This years real estate market is definitely going to be one for the books. To be sure, if you have shaky credit or an unsure employment picture this is probably not a great time to be trying to get a loan for a house. However, if you got the credit and the income, this market is offering once in a life time deals. Existing home prices are dropping by the month as sellers get more desperate to avoid foreclosure or other problems. New home builders have all but stopped new home construction, and are laying off workers. In fact, those builders who aren't offering deep discounts on the price of the house are throwing in more and more incentives just to move inventory.
It's also a mixed back for investors and house flippers. For the investors that have the cash to buy the properties, or who have a successful track record with the bank, it's probably business as usual. For the new or casual flipper who needs credit to make the next deal, the banks are closed for business. When will the market return back to a more predictable state, the pundits are saying anywhere from this fall to the end of 2009.
While 2008 promises pain for a lot of people in the housing market, it certainly won't be dull. If anyone has any horror stories or successes, let us hear from you.
As the foreclosure market heads toward the next year, things don't appear to be turning around for the better any time soon. But sometimes you can make more money in a bad market than in a good one. I recently read that the time to buy (whether it's stocks or houses), is when prices are falling and people are rushing to cash out or are losing their homes as the case may be. Couple that with the fact that banks do not want to be holding real estate that they just foreclosed on, and opportunities do exist.
For the investor that has enough capital to be able to purchase 2 or more properties for cash, banks want to talk to you. Banks get calls all the time from investors wanting to purchase a foreclosure house. But occasionally they get the investor that can buy 2 or more, for the right kind of discount. If you really want to get the bank's attention, offer to buy a house they own that nobody wants in addition to the house that you really want. The bank will love you, and they may call you on a regular basis with deals if you prove you can deliver and close the deals.
The catch is you gotta have cash, financing probably won't cut it. If you want to see an extreme example, search my blog for the article on Odel Barnes, all he does is buy properties that know one wants. The banks call him every day while he sits on his porch, and he pays around 10 cents on the dollar. So this information may pay off for you now, or maybe in the future. But I'm sure the strategy will always be effective.
The real estate market by nature is local, and that applies to buying investment properties as well. Most experienced investors stick to neighborhoods and areas they know well. They know the price ranges as well as what kind of features that the homes in that neighborhood have. For an investor that is just starting out, I would recommend picking 1 or 2 neighborhoods that are fairly mature in age. Look for and go to as many open houses in that neighborhood as you can find. If other potential buyers are at the open house, listen to what they say about the property. This is an excellent way to learn what potential buyers in the area are looking for.
Once you have bought your house, by acquiring your knowledge of the other homes in the neighborhood, you will know what fixtures and features you should be spending money on. And more importantly, not wasting money on those that don't add to the sale price of the house. It sounds like a simple concept, but you would be surprised at how many times I see people putting marble counter-tops and stainless steel appliances in a starter home. These same people are amazed that buyers aren't willing to pay a higher price for these features. It always pays to do your homework before you spend your money.
As a side note to my last blog about informative sites on the internet, I just found another site devoted to house flipping. Although it does have a book it is trying to sell, it gives away a lot of first hand advice from an experienced flipper that is very interesting. The link is as follows:
This site seems to be a lot more real world and realistic about the process of acquiring foreclosures and flipping them, than the shows you see on television. Having gone on numerous broker price opionion trips to document foreclosures, his account seems to be dead on accurate. Anyway, this looks to be a website to keep in your favorites list.
It never ceases to amaze me at what can be found on the internet, especially for free. The trick is to know how to ask the question on the search engine. Google is very helpful, you can navigate their help site and it will give you all kinds of tips and tricks to make your searches more successful.
Another online development that is now happening, is that big time newspapers like the New York Times and the Wall Street Journal have made their papers free for the browsing, on their websites. This is in response to the declining number of people who no longer subscribe to newspapers, but go online to get their news fix. The Wall Street Journal is especially a sweet deal, because they have sister sites that are devoted to certain markets, like The Real Estate Journal. This is so much easier than spending the day at the library, and cheaper than buying a ton of publications every week. The Realty Times is another great source of real estate information, and the chances are your local newspaper is also online and free. My paper only requires you to register online to have free access.
The papers are shifting the source of revenues from the consumer to the advertisers, but the consumer really benefits. Anyway, I will list a handfull of links to some of the sites I mentioned. If anyone has other sites, please let us know the links.
While this blog is primarily for people who like to flip houses and/or buy foreclosure properties, it is always about great ideas for making money in real estate. I ran across a great article on the Real Estate Journal online, a division of the Wall Street Journal. The article, which can be read in it's entirety by clicking the link at the end of this blog, is about what happens to a dock on waterfront property when restrictions against building new docks are put into effect.
People love their docks, and some have bought waterfront properties with docks in these restricted areas, and knocked down the old or less desired house. They then rebuild the house or leave the land bare with the dock, and resell for a premium. In some cases, areas that did not have restrictions suddenly pass them and some people will buy properties or land, and build a dock as an instant appreciation feature. And the value that the docks add to the total properties value is huge, and to avoid getting into the numbers, you gotta read the article to get the full scope.
Another similar strategy, in some hot markets like Charlotte, Atlanta, and other markets. Some older neighborhoods with modest homes are seeing another anomaly taking place. As people now desire bigger homes and more square footage than homes 30 years ago, some are buying 2 homes that are side by side and tearing both homes down. Then replacing them with a much bigger home. If enough of these happen in a given subdivision, it can transform the whole face of the neighborhood and property prices start to go up accordingly. In Charlotte (my home town), Uptown has been transformed over the last 8 years from mostly office and minority neighborhoods, to being the new place to buy a home and to go out for the evening. Given this, poor and neglected inner city neighborhoods are being discovered by investors. More and more of these homes are being rehabbed and sold for good size profits as the neighborhood starts to attract upper middle class home owners.
A few interesting ideas on making profits in a challenging market. If anyone has other ideas, please
Everybody in real estate knows about the prime real estate market, which tend to include the upper priced to luxury priced homes of the market. Then you have modest homes in the working to middle class neighborhoods. But what happens to the worst homes in the worst areas that the banks get stuck with thru foreclosure. These are the homes nobody bids on, often in high crime areas. How do banks get rid of these homes that nobody wants to bid on? They call Odell Barnes!
Odell Barnes buys these homes that are spread out all over the country, for anywhere from 20 cents to 10 cents on the dollar from the banks, without ever looking at the properties. As a matter of fact, he never has to leave his farm near Columbia S.C.. The banks call him at his house, and most deals are made over the phone while he sits on his porch. ABC news did a segment on him a few months ago, and it's a very interesting business model, and one thats made him a millionaire.
Instead of explaining the whole senario, if you click the links below, you can read the ABC story and also hear an interview of the man himself from NPR radio. It just goes to show, there is always another way to make money in the business, you just have to think out of the box sometimes. Just click the links below for the rest of the story, and happy flipping!
From all the articles and expert opinions I have been seeing and hearing, it looks like the worst is yet to come in real estate market in the way of foreclosures. The number of houses on the market because of repo's will be somewhat higher as the numbers get worse for the mortgage industry. At present, the jobs market is not looking as rosy as many thought it would. You add that to the housing slump and the credit crunch and the dreaded R word (recession) is suddenly a possibility.
All is not doom and gloom however, a lot of money can be made in a poor market. whether you are talking about stocks or houses, 1 man's default is another man's treasure. Not only will it be wide open on great deals for lower priced foreclosures, there will be a better than normal pool of renters to fill them with. One could create a nice portfolio of rental properties in a short period of time if you have the capital.
Anyway, the next 24 months will be anything but boring, I can assure you of that!
One avenue that tends to be overlooked by home investors is offering a rent to own option to their tenents. There are plenty of lease option buyers, even in a slow market. It's a win-win situation for both investor and resident alike. Once the renters lock in a sales price that the investor has offered, the investor simply can't lose. The owner gets a bigger revenue stream of rent, and his house gets sold at a profit. If the sale does not happen, the owner keeps the extra money. If the renters exercise the option to buy, they buy the house under circumstances more favorable to them (by having a down payment saved up).
Another interesting way to look at properties when considering a purchase to hold for investment purposes, is to look at the land as the appreciating part of the package, and not the house. Under this strategy, you will not usually want to deal with luxury homes. Instead, you will want to be looking at properties in working and middle class subdivisions. These houses are more likely to be in the range of most tenants and rent to own candidates, and the land will usually be the driving force in the property appreciating in price.
Good markets or bad, these are 2 strategies that should work day in and day out.
Traditionally, the credit score of 620 is where prime mortgage rates end, and sub prime rates begin. While this can vary from bank to bank, that's kind of the rule of thumb. It looks like with what's happening in the current credit crunch, that dividing line has gone (or is going) to about 680.
From a Realtors point of view, this makes getting a buyer preapproved more important than ever. From an investor's point of view, this tight market will probably make or break a lot of good deals out there. As a matter of fact, some lenders are shying away from making loans on second homes, investment properties, commercial loans, even borrowers who have decent credit. Some loans that were preapproved are now being rescinded before the loan happens.
All this makes for a very slippery playing field in the real estate market today. At some point in the future, lenders will come out of their cave and decide to do business with the real world again. But for now, financing has to be at the front of the process before buying anything right now. As I have mentioned before, the silver lining to this is there will be a sizable number of foreclosure properties to choose from, if you can just get them financed. If anyone has any recent financing horror stories to tell, please share with us.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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