This may apply to other areas of the country also. But that's up to you to determine.
First of all, why 2010? Because this is likely to be the time that you'll find the best prices as time passes. Orange County and most of Southern California is some of the most sought after property in the world.
Remember the days when cash was king? Oh, how fun it was - right? You could make an offer to buy a property, and step right past the guy who needed financing. Actually, you still can do that. It's just a bit harder... and doesn't usually work when the other buyer who needs financing offers $10K+ more for the property. You see, 30-45 days isn't really a long time to wait for thousands more in profit, or thousands fewer to lose - whichever the case may be. Therefore, the successful buyer/investor today needs to put themselves in the seller's shoes.
So ask yourself this... If I put a property up for sale and receive 2 to 4 offers within a week, what percentage of the asking price would I be willing to accept? The answer to this question is 100% or more, right? When there are multiple offers, there is a very good chance that at least one of them is very near to market value (and usually the asking price). If the buyer with the highest offer is unable to get their financing and close the sale, you (the seller) will likely still have some great options. First, your agent may have been holding one or more other offers as a back-up. So you could simply accept one of those back-up offers. Second, the listing could be changed back to Active Status and there is a very good chance that you will have 2 to 4 new offers during the next week.
It seems that there are a fair number of real estate investors today, that have a tendency to think that they need to purchase the property for a price that is well below the current market value. This may be necessary, if they're looking for a quick profit. However, having been through a similar market in the 1990's, I have a different perspective. If you're going to occupy the property or otherwise hold it for a period of years, I suggest that you pick one which fits your needs, and be excited about the fact that you are buying in a "down cycle". On top of great prices (about 50% of what they were just a few short years ago, you are also able to receive tax incentives up to $8,000 depending on the details of your purchase !
This advice comes from a real estate professional that missed out on a number of great opportunities to purchase homes the last time a "down cycle" came along. I was trying to save as little as $1,000 in some cases. Consequently I missed out on hundreds of thousands of dollars in appreciation over the next 7-8 years on a handful of offers. What did I say I did wrong? I was trying to save $1,000. Do you see how a $1,000 mistake can translate into literally multiple hundreds of thousands? In this kind of market, the one who gets the purchase wins. It's that simple.
When you're competing against buyers who are not investors, they are much more likely to be happy paying market value. To be sure, most buyers today would love to buy a property for below market value. But the non-investor will usually fall in love with the property and pay full market value or more in a multiple offer situation. In few years from now, those same buyers will be proud to say that they bought their home at a price that is near or possibly below what their neighbors paid in 2003. Isn't that enough? It's kind of like the stock market this way. If you get too greedy, you just may end up losing more [appreciation] than you'll save trying to obtain a lower purchase price.
Can a buyer still find properties for $10K to $20K lower than they are listed for in Orange County today? The simple answer is yes. But will it be worth your time trying to find them? Maybe - maybe not. If you're considering shopping for an investment property for entertainment, you can expect to get many hours of entertainment by not listening to your Realtor®. So perhaps you should seriously ask yourself this question: Am really I willing to spend the time necessary to keep watching for properties to buy, signing / initialing 20+ pages of documents and writing checks over and over again to get one property?
In the meantime, it is also possible that this market will pass you by. For instance, just a 1% increase in interest rates could cost you $65/month more for every $100K you finance. As an example - if you plan to keep the property for 30 years with fixed rate financing the difference between 6% and 7% could end up costing you over $23K per $100K financed over the life of a loan. That's $92K for a $400K property.
A word of caution: The properties that don't have multiple offers on them are usually the hardest ones to sell. Buyer beware - check out their location. Are they located next to a busy street or perhaps a freeway? Do they suffer from other traffic generated noise from a race track, a train track, a sports complex, or an airport? Is parking limited due to a nearby school or local attraction?
Making money buying real estate in this market is really very easy. Find the property that fits your needs best. Believe in your Realtor®, when it comes to guidance on a price to offer. Buy as many properties as you can comfortably afford after a careful analysis of rentals in the area. For those of you who have never invested before: When I say comfortably, it doesn't necessarily mean that you won't be giving up something else to make this venture a success. Most often, real estate investors are giving up something to gain an investment property. So don't feel like the Lone Ranger if you need to decide what you'll need to do without in order to get started in real estate investing.
If you don't have the money; find an investor partner who has the money - but doesn't have the time to invest. Hire a sharp agent to help you find the right property, and you can make it happen! Remember, it's better to have a piece of the action than none of it. If you go into a partnership, be sure to have a Joint Venture Agreement prepared by an Attorney. This way the partners are in total agreement on what will happen if either partner's life should end; when the property can or will be sold; how much of the proceeds each partner will receive; and anything else that may possibly put stress on your relationship when the day comes to dissolve the partnership.
Another option if you don't have the money or the time is to contact me. I have some great ways for you to succeed in real estate investing, without spending a lot of your own time or having spendable income or a nest egg to invest. Now go, buy and be happy. The best time is now!