The Real Estate Encyclopedia
Guide to Investing in a down market real estate market
Category - Real Estate Information Sources - Real Estate Articles

First of all, there has never been a better time to buy property than now. The sub prime mortgage meltdown is a blessing in disguise for investors with the right liquidity and the right eye for a deal. Before all these problems emerged, property values were over-inflated, leading many people to may far, far more than what their land and property value was worth. As the neighborhood paid more, the neighborhood was worth more, the line of thought went. That’s patently not true, especially now. Land is worth what someone (or anyone) is willing to pay for it. When looking at a house, building, or other property, you want to asses its potential value; how close is it to freeways, highways, trains, and other local transportation infrastructure. Second, you want to find out how close it is to schools, shopping, and other support infrastructure. Finally, you want to look at how close it is to a metropolitan area; if you have to go over the river and through the woods, it might just be a bit too far off the beaten path. Now that you feel you’ve got all three factors (location, location, and location), you need to look at the price that’s being asked. Remember, you are the one holding all the cards; you have the money, you have a lot of property to look at (probably the most property offered all at once in history) and you know the buyer desperately wants to sell. You’ll want to start off low, of course, and the counter offer will be still out of your ballpark figure. You want to pay no more than a 15% to 20%discount on the price of the house, business, or other property.

Remember, the real estate market is sliding into the deep freeze right now, so don’t be afraid to walk away. Most of the time, the property probably needed fixing up anyway and you’d need the extra money to fix it up in order to rent it – Don’t be fooled into thinking you can “flip” the house in this market. Flipping is a thing of the past and even if your buddy is doing it in Florida, or Georgia, or New Mexico doesn’t mean he’s right; chances are he’ll be sitting on that house for quite a while and then wind up renting it anyway. Now that you’ve woken up and realized there’s going to be no quick-flip on this piece of property, you can see why we said not to pay more than a 20% discount on that house. Now, once you’ve gotten that place, you’ll probably need to fix it up a little; just enough to make it attractive. In this downturining market, the landlord is going to become indispensable as the houses people can’t afford to live in sit empty and the former residents need to look for a roof over their heads. You can expect to slowly begin earning your investment back while still being ahead of the game when the real estate market bounces back (and you know it will).


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