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Real Estate Investing Basics
Posted by Lorraine Ross on June 5, 2008
With the mortgage crisis rearing its ugly head recently, many homes are available at a great value and it is, by some, a wonderful time to invest in real estate. Many real estate entrepreneurs see this as an opportunity to invest in the real estate market with the anticipation that prices will eventually climb and profits will be just around the corner. Many foreclosed homes are available for pennies on the dollar and would allow investors to truly make money if bought and sold at the correct times. As the economy begins to rebound, many families will look to purchase new homes and those who have invested in homes for solely investment purposes will reap the benefits. Mortgage rates are quite low at the moment and loans can be found through dependable lenders throughout the nation in all areas. Although the qualifications to obtain a loan have been tightened, investing in a home is possible even during this time of economic crisis.
Besides those who solely purchase homes for investment, it is also a great time to consider the purchase of a second or vacation home. With prices at historical lows, and inventory at an all time high, a nice second home can be purchased at what would most certainly be considered a steal. It is simple economics, when there are more homes than buyers, prices often drop dramatically as is the case at this time. Homes that are available often cover all price ranges as those affected by the recent mortgage crisis were and are from many different backgrounds. If you are in the market for a second or vacation home, there are many places to investigate as it seems that the homes available are in all regions of this country. It is an amazing sight to see the various options available.
Some initially purchase a home for investing purposes but end up liking the home so much that they keep it for themselves. A second mortgage is not always ideal, but when you know that you wish to visit a particular place and you get a great deal on a home, the investment is a wise one. With the rising cost of travel, including high airfare and gas prices that are out of control, it is nice to know that your lodging is covered and that the mortgage you pay will make you money in the future if and when you decide to sell.
Is real estate still so attractive niche ? As I know according to news value of real estate is unstable and this investments can be risky
I read Lorraines post about the current market being full of opportunites. It’s universally true that in all countries a downturn is paradoxically great news for savvy investors, as they sense that it’s the perfect time to buy
I own several real estate private sale sites in Australia and the market has cooled in my country as in the states.
Plenty of pundits are suggesting that the downturn might even last as long as 2012. This makes it the ideal time to build your portfolio.
Whilst no one wants to benefit from the pain of others the grim reality is that if people are selling distressed real estate they may as well be selling it to you as to the next guy ,right ?
Thanks for this great blog.. as it helps me keep a perspective on the global real estate trends that inevitably affect us inAustralia at some point.
Andrew Blachut
Lorraine
One of the key issues we are facing with our clients is the difficulty in obtaining finance. Our overseas buyers are very motivated to buy, in line with the points you make in your write-up, but they are deterred by the much lower LTVs and the unwillingness of loan companies to work with second or vacation home buyers.
Do you see any relief in this area, and if so, how soon?
Real Estate Investment was also good. As long as you know what would you do and equipped with enough knowledge on Real Estate Investment.
Real Estate investing can be real tricky at the moment due to instability in most major markets. Market research is critical. I would agree that long term it should be a sound investment and this could be the time to find that vacation home.
I also reckon that real estate business can be risky — well, without the proper knowledge of course. Not that I want to be pessimistic; the outcome can be great if the right knowledge is applied in conjunction with discipline.
Lorraine,
I agree, it is a GREAT time to invest! Not only do I help clients invest, but I also invest in homes myself.
Christina
According to Boston City Properties, prices in the Boston Real Estate market have gone up around 5% in Downtown Boston in 2007, from 2006, which was supposedly a big market crash for the country. I also read on the site that real estate in boston have gone up in 2008 as well. Have you heard of any other big metropolitan cities where this has happened as well?
I think it is always a good market. It’s just a matter if it is good for the buyers or good for the sellers. Smart investors ALWAYS buy below market.regardless of waht the market is doing. Of course as the market changes your strategy should change. In todays market buy and hold makes more sense than flipping.
WE do a LOT of work for real estate investors here in Florida.
Many investors buy ugly looking property, and we make it look good again.
I have cleaned many a roof for investors who THOUGHT they needed a new one.
There are bargains galore here in Florida, now is the time to BUY.
Fred, I think this is happening everywhere. One of my friend in Virginia has told me the same story.
Lorraine,
You are correct. One thing I am worried about is the adjustable rate boom that is coming again at the end of the year. I don’t think anyone is at bottom yet until the new wave is done and FNMA and Freddie know what is going on.
I like your website as I am a real estate investor and a real estate broker. My market has not softened to the point where I see great bargains. But I do see areas where investments can be found for pennies on the dollar. The next year could be the time to buy.
Pokeren, It is still hot but a little unstable. I like all the fluctuation because it creates a lot of opportunities for investors and buyers. For investors, it is just like a full time profession and they can decide where to invest and where not to.
Unstable is the understatement of the year! This whole mess might take as many as 3-4 years to clean up. There are definitely hot spots throughout the country but generally it is a tough time to invest in real estate.
I think that Real Estate still is a very favourable and safe type of investment, however it all depends on the country being invested in. Europe has not been affected by the crisis badly so it should be ok.
In my opinion now housing was in good price, after huge discount causes by submortgage.
there’s always boom and bust cycle in any market.
If you try to make something just to fit your uninformed view of some hypothetical market, you will fail. If you make something special and powerful and honest and true, you will succeed.
I agree wholeheartedly with your assessment of the market. I also understand that it’s extremely hard to get a loan to buy real estate (or to do anything, for that matter) right now, but if enough people saw opportunity instead of the sky falling, then buyers could snatch up all of those foreclosures and prevent the rise of vacancies in neighborhoods nationwide.
I think what we’re witnessing is the fallout of the Clinton and Bush Administrations’ push for “everyone to become a homeowner.” Not everyone is fit to be a homeowner, as we’ve discovered to our chagrin, but it will continue to create opportunities for investors. For people thinking about becoming real estate investors or landlords, and looking for more information, there are some great articles right here if you go back through some of the archived blog entries. There’s so much genuinely informative content on the internet about real estate investing that there’s really no excuse not to be an informed investor; if you’re looking for more good articles about real estate investing then try here for a large database of “>landlord articles, or here for a good real estate investing blog.
Cheers,
Brian
I work in a very different market from you in Vancouver, Canada. NINJA loans were not an issue in my market. Sub-prime mortgages accounted (by most estimates) for at most 5% of all mortgages. Mortgage lenders in Canada are far more conservative than in the US.
That being said, we are being affected by what’s happening now in the US. We like to say that, “if the US sneezes, that Canada catches a cold” and that is certainly being borne out now. Our market is a strong Buyer’s market now. Listings are way up, sales are way down, and prices are drifting lower.
Everyone wants to know, when will it turn around? Where will prices bottom out? These are relevant questions in a lot of markets in North America and around the world right now. Unfortunately, the tough part is that no one knows. Timing and predicting the market is impossible.
I do believe that our market (read about the Vancouver real estate market here in my Vancouver real estate blog) , in particular, has a lot going for it. I also believe in buying against the grain. The hype in the Vancouver real estate market is all negative right now. We are bombarded with negative news and opinions. The sky is, apparently, falling. If we look back over time money is made by going against the grain, by buying products on sale.
All the best,
Sebastian
Yes, now is a good time to buy, but you must do your homework. Most of the people that have mortgage problems today did not do the homework on property investing. They just followed the herd and bought the first property they liked.
I think no property is an investment, unless it is cash flow positive from day 1. If you buy a property for 30-50% below market value to flip, is another story or ball game.
Buying a second property as a holiday home is not investing, because that property is not generating income. So it is a liability, like the house you stay in.
You are correct.I agree, it is a GREAT time to invest! Not only do I help clients invest, but I also invest in homes myself.
A lot of people think it is a good time to invest, but I’m still not budging! I’m putting away my money and keeping it there. I just can’t see it getting any better because there aren’t any jobs, crime is rising, not enough funding for each city, and businesses are starting to crash. Some people think that somehow the new president in the white house will be able to fix everything, you are wrong, it’s going to take at least 7-10 years to get everything back to normal.
awesome site…
I think real estate or property is a good market in the world.
Many people still need buy or rent a house for their living
Now may be a great time to start investing in real estate. Great article. The value of homes across the country has dropped dramatically and interest rates are phenominal. It is getting tougher to qualify for mortgages and the stated income loans have all but disappeared. If you can qualify this is probably the best time to invest in real estate in a long long time. There are also ways to get around the high financing costs that many mortgage companies charge. I think lenders fees will continue to decrease as this mortgage crisis and banking crisis continues. There is so much heat on mortgage companies these days.
I think that the best way to save and in some cases increase your capital is investing in the real estate! And the best time to do this is NOW!
Greetings from Spain.
I like your website .
You are correct. One thing I am worried about is the adjustable rate boom that is coming again at the end of the year. I don’t think anyone is at bottom yet until the new wave is done and FNMA and Freddie know what is going on.
Thanks.
I agree, it is a GREAT time to invest!
One thing I am worried about is the adjustable rate boom that is coming again at the end of the year.
I do believe that our market , in particular, has a lot going for it. I also believe in buying against the grain. The hype in the Vancouver real estate market is all negative right now. We are bombarded with negative news and opinions. The sky is, apparently, falling. If we look back over time money is made by going against the grain, by buying products on sale.
All the best,
What are the real drivers for real estate in 2009 and what are the impediments.
Ironically one of the biggest drivers will be the lowering of prices that has already occured across both America, the UK,Australia and most of the Western world.
Lower prices evetually stimulate sales but the question is how long does that take to kick in?
And the pointy end of the stick on the other side of the equation is finance and the difficulty in getting money to take advatage of the bargains that suddenly abound.
Will these two factors balance one another out and result in a period of relative inactivity in the property market? I think that is likely and that it will be 2 years before the property market shows signs of solid sustainable recovery.
In Australia we have been on a honeymoon as the Government has put in place spome quick fixes to shore up the market by assisting first home buyers. That’s fine until the grant monies run out due to fewer property taxes being derived from fewer real estate transactions.
Does the US have similar first home buyer assistance in place at present and does it, or would it help… given the downturn and worries over employment?
How much further does everyone think the real estate slide will continue? I think it has at least 18 months yet.
Hard to say when the bottom will be, as they say best time time invest is 20 years ago, 2nd best time to invest is now.
Mark.
It’s true that the prices are now at an all time low and that makes the conditions favorable for buying a house as an investment or as a second home. But also people are in danger of losing their incomes and encountering difficulties securing a loan. So just because the prices are low that doesn’t mean it’s a good idea to commit to more debt.
There are many parallels between the real state market and the stock market, in that the best time to snap up bargains is in a crash.
However, human nature being what it is, the minute prices start tumbling people irrationally shy away from investing.
This time is certainly a great time to invest! Especially in real estate with the way prices are. Thanks for this great article, look forward to reading more!
I wish I was in a position to invest. I will get there, but it will take some time. Nice to see so many people positive about things.
Regards
Unstable is the understatement of the year! This whole mess might take as many as 3-4 years to clean up. There are definitely hot spots throughout the country but generally it is a tough time to invest in real estate.
There is many reports saying the “Pros” are buying up properties in the top destinations like Florida and California. This is a good sign for the bottom!
Real estate certainly works in cycles. I personaly believe we’ve experienced the worst of this bust and look forward to the coming boom!
The Columbus market is great right now for investments. There are so many great bargains its hard to imagine not taking advantage of these deals.
Surely these are important things you need to know when ivesting in real estate, no one can start without following all of your advices.
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