How do we invest now?

MakingMoney said: "Now that the housing market is down, there are more foreclosures than ever. How can we profit from all this?"

Aligator said: "Depends upon your area of the country. 'Round here it's business as usual. In California and Nevada it's a little different."

thezster said: "Screw seminars.... They're there for nothing more than to sell you something!! The market is down now - and may go a tad lower... BUT - over the course of history real estate has done well for the saavy buyer (buy low/sell high - duhhhh) - and will continue to do so.. After all - LAND, they're not making any more of it (except in Dubai...). I'm convinced that the time to buy is at hand - or extremely close to it... for long term, very profitable returns.... A lot depends on the region you're investing it (avoid California/Nevada/Boston, etc.) - and where they are on the spin cycle.... I've done extremely well with real estate over the past 8ish years - and the trene continues..... (I'm currently setting up my present property for sale - to buy another one lower/fix it up/sell it higher)...."

Airelon said: "Yeah. I'm expecting lower prices still. Some friends of mine are starting to buy. One friend of mine is starting the process of getting a home that was worth 130k a year ago. Looking to buy it for 65k. I'm starting to get close to purchasing. But I'm still holding out. Plus, I'm in Michigan. No hurry to buy just yet. To answer the original posters question - the way to profit? Patience. In my opinion, we're not done yet."

FirefighterB said: "I agree with more drop. Values still don't seem "reasonable" in most areas when compared to the average income. A 10-20% drop in a value that's been up 50-100% in the last 7-10 years, when salaries have actually declined on average over that time, does not make it "affordable" IMHO."

DStewart said: ""Buy low and sell high"....Take a look at this data: Median home prices have fallen a record percentage in 50 years. Existing home sales have fallen a record percentage in 27 years. Has the "housing bubble" burst? Is this a great time to buy low? You decide for yourself."

FirefighterB said: "[QUOTE=DStewart;62976]"Buy low and sell high"....Take a look at this data: Median home prices have fallen a record percentage in 50 years. Existing home sales have fallen a record percentage in 27 years. Has the "housing bubble" burst? Is this a great time to buy low? You decide for yourself.[/QUOTE] When you consider that the values that homes are still at are down from the super inflated prices of the last 7 years or so, it still doesn't make housing "great" IMHO. Here's a [URL="http://finance.yahoo.com/real-estate/article/104341/Housing-Meltdown"][COLOR="Blue"]GREAT ARTICLE[/COLOR][/URL] passed on to me by Scottlarock. Most importantly, pay attention to the Schiller Price Index chart on page 2. That chart doesn't make me feel that prices are at a good level now; even if they have come down. Nor does the curt quote from Schiller, who is basically gagged due to his vital role in the Case/Schiller home index that the Fed and traders so rely on: "This is a historic turning point." It's a great article."

DStewart said: "That is a really good article! My favorite part was "And with homeownership no longer seeming like such a sure thing, national housing policy could become more evenhanded toward renters." I predict that this will be a very lucrative time for landlords. One for being rented to capacity and two for being able to be more selective about rental applicants."

FirefighterB said: "Agreed on that aspect. I think that, now, many that had the money to purchase and are not as inclined to, will be renting longer. It will also be a great time to pick up rental properties when the market bottoms. As the saying goes: "when there's blood in the street, buy property." Of course, knowing when the bottom will hit is going to be the tough part. But, it's a CYCLE and, in the past, most cycles have taken quite a few years to reverse. Since this one is a shade over two years from it's peak, I don't think we're even near the bottom yet. Depending on the economy, it could be 2009 or 2010 until that hits."

beachmaster said: "[QUOTE=FirefighterB;63059]Since this one is a shade over two years from it's peak, I don't think we're even near the bottom yet. Depending on the economy, it could be 2009 or 2010 until that hits.[/QUOTE] Ordinarily, that would seem right, but this cycle is different. There is a "perfect storm" out there that might cause things to really go from bad to worse. I wouldn't count on real estate coming back up for another 5 years minimum. Where I'm at, even investors with rentals are hurting as the renters are defaulting faster than home owners. Being a co-founder of our local real estate investor club, I hear a lot of horror stories. So many are having to evict tenants, then have a hard time finding other tenants that are worth a damn. But there's still money to be made in real estate in the overpriced markets. Become an auctioneer! I've seriously considered it."

electronicsseller said: "even though the housing market is down ,but still a lot of people can't afford the price .the seller will still have the opportunity to benefit , they will never lose their profit .:whacky011::whacky011:"

pranith said: "Well it all depends on the area you stay. ithink currently the housing market is down and its not the time to invest."

sr106 said: "yes, currently the house marketing is very low, its not better fpr investing... in the next month, i think it will be higher..."

tomtat1 said: "I think financing lease purchases for others on Bank owned properties is a good way to make money in the current market. The strategy is this. You find people with good current income who want a house but do not have the credit to qualify for financing. Let them chose a house from a list of bank owned properties in your area. Write a lease purchase agreement with them at the listed price for the property they choose with a substantial down payment (5-10% the more the better)and normal interest rates As these houses are already priced to move they get a good deal. Now go and negotiate a lower price on the property buy it and they move in. Since it is a lease to own you do not have the headaches of a landlord. The tenant handles maintenance and generally treats the property like it is theirs and not a rental. The best case scenario, the tenant lives out their 3-5 year lease repairs their credit and gets a mortgage to buy the house (Win-Win). Worst case they stop paying and you have to foreclose. However you are protected from loss from their down payment and whatever reduction you got in the first place. One final thing make sure that the language in the original lease has an exit clause for you if you cannot negotiate a deal with the bank that gives you a large margin of safety. I use 20% as a minimum. This gives you protection from further market deterioration or larger profits if all goes well. I like to be up front with my potential tenants and tell them exactly what I am doing and why, but this is a matter of choice. I think it develops a rapport that makes the whole process go smoother. No secrets, no resentment if they feel I am being unfair with them we part company before the whole process ever starts."

opencad said: "Someone below said: "The market is down now - and may go a tad lower... BUT - over the course of history real estate has done well for the saavy buyer (buy low/sell high - duhhhh) - and will continue to do so.. After all - LAND, they're not making any more of it (except in Dubai...). I'm convinced that the time to buy is at hand - or extremely close to it... for long term, very profitable returns...." As I see it . . . The problem with realestate has to do with the fact that its no longer "liquid". Banks don't want to make loans under the same terms they used to. This means that its much harder to buy property, so fewer people can buy property, so there's less competition/demand . . . thus the price falls. Also, the the "seize up" in the consumer credit and small business credit markets means consumers are spending less, and businesses can't ride out the slow down on their credit. So they are letting people go. The upshot is, consumers are losing homes and businesses are going out of business which has an impact on commercial property. The result is that a bunch of property has been dumped on the market. So . . . for that problem to get better, wouldn't you have to see some major relaxing of the credit market? I don't see that happening. The Fed is lowering rates, but loans are still being made under new terms . . . I just can't see that problem getting better any time soon . . ."

tomtat1 said: "[QUOTE=opencad;69159]Someone below said: "The market is down now - and may go a tad lower... BUT - over the course of history real estate has done well for the saavy buyer (buy low/sell high - duhhhh) - and will continue to do so.. After all - LAND, they're not making any more of it (except in Dubai...). I'm convinced that the time to buy is at hand - or extremely close to it... for long term, very profitable returns...." As I see it . . . The problem with realestate has to do with the fact that its no longer "liquid". Banks don't want to make loans under the same terms they used to. This means that its much harder to buy property, so fewer people can buy property, so there's less competition/demand . . . thus the price falls. Also, the the "seize up" in the consumer credit and small business credit markets means consumers are spending less, and businesses can't ride out the slow down on their credit. So they are letting people go. The upshot is, consumers are losing homes and businesses are going out of business which has an impact on commercial property. The result is that a bunch of property has been dumped on the market. So . . . for that problem to get better, wouldn't you have to see some major relaxing of the credit market? I don't see that happening. The Fed is lowering rates, but loans are still being made under new terms . . . I just can't see that problem getting better any time soon . . .[/QUOTE] I agree! That is why I like lease purchases here. The inability of others to get credit works in your favor, and you are not counting on future price appreciation to make money. You make money from negotiating a better price with the bank today, and believe me you are in the driver’s seat right now as foreclosures mount and the banks scramble to unload nonperforming assets."

beachmaster said: "[QUOTE=tomtat1;69178]I agree! That is why I like lease purchases here. The inability of others to get credit works in your favor, and you are not counting on future price appreciation to make money. You make money from negotiating a better price with the bank today, and believe me you are in the driver’s seat right now as foreclosures mount and the banks scramble to unload nonperforming assets.[/QUOTE] I have sold with lease/options. It's not a piece of cake. First, you will need a buyer who can give you sufficient deposit to make you feel good... since most of your lease/option buyers have one or more negatives against them (bad credit, low income, low available funds, etc.), it is difficult to find the right tenant/buyer in the first place. They will need to be able to make the same payment or more that a home buyer would have to make (or else you have negative cash flow). If they default, it's not as easy (in my experience) to evict as a simple tenant is, that is if they choose to fight you in court. Many will choose to fight, especially if they have five grand or more deposit placed with you. Judges have been known to convert your lease and option to a mortgage which then requires and expensive and time consuming foreclosure instead of simple eviction. And when you get the house back, don't expect it to be in good shape. You may have $5k, $10k or more in repairs to do before you can find your next tenant/buyer. And that's after spending months of trying to get them out, while you are still paying the note, taxes, and insurance. Then, if you do happen on a good tenant/buyer who is making the payments, once the term is up, they have to get a loan... if the lending restrictions are not eased up by that time, they may still not be able to obtain financing, and you have to decide whether or not to extend their term. In essence, you are a landlord who may have a more difficult time than your ordinary landlord in removing a tenant. And your credit is tied up (assuming you bought the property with a loan in your own name, which puts you at risk right there as you have more obligations on you than your tenant/buyer does on theirselves). If you are going to do lease options, don't buy the property with a new loan. Either take a property subject to the existing loan that a homeowner has, which keeps the loan in their name, not yours, or you can lease option from them, then do a sandwich lease option to the next person. You will be at far less risk... if you simply lease/option it from your seller, you can write it so that you are obligated to only 12 months of payments (renewable for let's say 3 more 12 month terms)... in this way, you are obligated to only 12 payments instead of 360. I am out of it for now... I see no reason in Florida to jump back into real estate. I know of my own experiences and those of many friends and colleagues. It's a LOT harder than it was a couple of years ago."

whiteblue1942 said: "how do you invest now? why this is the best time to buy! looks to me like the market is steadying off and when most people are afraid to buy, this is when you should. market can value of homes can only go up from here!"

tomtat1 said: "[QUOTE=beachmaster;69180]I have sold with lease/options. It's not a piece of cake. First, you will need a buyer who can give you sufficient deposit to make you feel good... since most of your lease/option buyers have one or more negatives against them (bad credit, low income, low available funds, etc.), it is difficult to find the right tenant/buyer in the first place. They will need to be able to make the same payment or more that a home buyer would have to make (or else you have negative cash flow). If they default, it's not as easy (in my experience) to evict as a simple tenant is, that is if they choose to fight you in court. Many will choose to fight, especially if they have five grand or more deposit placed with you. Judges have been known to convert your lease and option to a mortgage which then requires and expensive and time consuming foreclosure instead of simple eviction. And when you get the house back, don't expect it to be in good shape. You may have $5k, $10k or more in repairs to do before you can find your next tenant/buyer. And that's after spending months of trying to get them out, while you are still paying the note, taxes, and insurance. Then, if you do happen on a good tenant/buyer who is making the payments, once the term is up, they have to get a loan... if the lending restrictions are not eased up by that time, they may still not be able to obtain financing, and you have to decide whether or not to extend their term. In essence, you are a landlord who may have a more difficult time than your ordinary landlord in removing a tenant. And your credit is tied up (assuming you bought the property with a loan in your own name, which puts you at risk right there as you have more obligations on you than your tenant/buyer does on theirselves). If you are going to do lease options, don't buy the property with a new loan. Either take a property subject to the existing loan that a homeowner has, which keeps the loan in their name, not yours, or you can lease option from them, then do a sandwich lease option to the next person. You will be at far less risk... if you simply lease/option it from your seller, you can write it so that you are obligated to only 12 months of payments (renewable for let's say 3 more 12 month terms)... in this way, you are obligated to only 12 payments instead of 360. I am out of it for now... I see no reason in Florida to jump back into real estate. I know of my own experiences and those of many friends and colleagues. It's a LOT harder than it was a couple of years ago.[/QUOTE] All of this is why it is so important to find the right tenant and develop relationship of mutual respect. Finding a good tenant is my first step. On other posts here I have made comments on doing extensive back ground checks and targeting people in certain professions. However If the tenant does stop paying I think you are still in better shape than a landlord having to evict. I have had this happen once, and was able to negotiate a settlement with my tenant, giving her some of her deposit back, but in return the house was not trashed, and I got paid for all the time she was in it. I basically used her deposit to pay the back rent and some minor repairs and gave her the rest back. As this was equitable to all parties she saw no need to fight me in court or do damage to the house"

beachmaster said: "[QUOTE=tomtat1;69316]All of this is why it is so important to find the right tenant and develop relationship of mutual respect. Finding a good tenant is my first step. On other posts here I have made comments on doing extensive back ground checks and targeting people in certain professions. However If the tenant does stop paying I think you are still in better shape than a landlord having to evict. I have had this happen once, and was able to negotiate a settlement with my tenant, giving her some of her deposit back, but in return the house was not trashed, and I got paid for all the time she was in it. I basically used her deposit to pay the back rent and some minor repairs and gave her the rest back. As this was equitable to all parties she saw no need to fight me in court or do damage to the house[/QUOTE] In some states (non-judicial rules) foreclosing may be easier than evicting. In Florida as well as many other states, a judicial procedure is required to foreclose, and that can take several months. Yes, you might be able to work out a deal with the tenant/buyer, but that is a big "if". Regarding finding the good tenant or tenant/buyer, this is part of the issue. The good ones are fewer and more far between, and there is more competition among property owners to find that special tenant. Plus with today's economy, with fuel and food costs soaring, and people losing their jobs, you can start out with a fine tenant who runs into economic troubles and just are not in a position to pay their rent on time. There is more competition for the good ones, and even the good ones now are more likely to default than in recent years past. That is increased risk on the part of the investor you would agree? All other things being equal, I would just sum up by saying that yes, it is possible to make money in real estate today. But it is a lot more difficult, and there is a lot more risk now. For the investor who is sitting on mountains of cash, maybe now is the time to buy. However, if I were in such a position and I decided to buy today, I would only pay a very deeply discounted price, because we have not found the bottom of the market yet, and it could be a good while before we do find that bottom considering all of the aspects of this economy that are before us, not least of which is the mortgage market, costs of fuel and food. Invest in today's real estate market if you will, just be very very cautious."

buyproperty said: "Market price is getting down among these days. I can't any thing if it is occurring continuously. We have to wait for some time otherwise we will faces lot of problems with financial credit. Can any one give the suggestions."

tomtat1 said: "[QUOTE=beachmaster;69516] Regarding finding the good tenant or tenant/buyer, this is part of the issue. The good ones are fewer and more far between, and there is more competition among property owners to find that special tenant. Plus with today's economy, with fuel and food costs soaring, and people losing their jobs, you can start out with a fine tenant who runs into economic troubles and just are not in a position to pay their rent on time. There is more competition for the good ones, and even the good ones now are more likely to default than in recent years past. That is increased risk on the part of the investor you would agree? All other things being equal, I would just sum up by saying that yes, it is possible to make money in real estate today. But it is a lot more difficult, and there is a lot more risk now. For the investor who is sitting on mountains of cash, maybe now is the time to buy. However, if I were in such a position and I decided to buy today, I would only pay a very deeply discounted price, because we have not found the bottom of the market yet, and it could be a good while before we do find that bottom considering all of the aspects of this economy that are before us, not least of which is the mortgage market, costs of fuel and food. Invest in today's real estate market if you will, just be very very cautious.[/QUOTE] In traditional real-estate investing; you buy a property, then market it. Because you have negative cash flow, you tend to settle for anyone you can find that is interested in your particular property. This leads to trouble down the road. In the strategy I use, you do not feel this pressure because you have not purchased the property yet. Instead of focusing on the property, you can focus on the tenant. As I have stated before I like mid level medical professionals (Nurses, x-ray, Dental hygienists). My wife is a Dental Hygienist so she has some connections at the school she went to which was combined Nursing/Dental hygiene. We post on a bullion board there. We also post at a couple of hospitals in our area. I focus on young people just out of school who haven’t established the credit to buy a house yet, or divorced people whose credit was destroyed by there partner in the break up. Healthcare, unlike other areas of the economy is booming. People in this field have no trouble finding and keeping well paid jobs. With our population aging I don’t see this trend reversing anytime soon. Finally, while home prices may go down further from here, I am getting extremely good deals right now. The last deal I negotiated was on a house that was last sold for 225K. It was Bank owned and they were asking 199. I bought it for 150. I wrote a 3 Year contract at 199. I put down right at 32K. If the deal goes off without a hitch I will get right at a 36% ROI. The time to be cautious was when that house was selling for 225K not when you can get it for 150K. I cannot speak to areas like Florida that had such a massive run up in past years, but buying at a 33% discount to where this house sold for just 2 years ago gives me a large margin of safety against further price erosion in my market. If the market does deteriorate from her, what the hell, the next deal I write will be that much better. I don’t have 20 or 30 houses all sinking at once; I have 3-5 that I am constantly churning."