Is a Slow Market a Good Time To Buy?

General Real Estate Investing
1

Here is Daytona Beach, Florida area, there are over 5000 listings on only 300 new purchases were made last month according to the MLS. Of course 2004 and 2005, you could not keep 500 listing on the MLS in any given month. Property valuse went sky high, of course 100% financing was hot at the time. Then, rates went up, and have leveled out somewhat, but what seem to hurt everyone is this area was the Property Taxes! WOW… People are hurting, and I am sure there wilbe alot of Foreclosures coming up soon, and there will probably be very little equity in most of them. Property values have gone down some as well.

But people are afraid to buy right now, probably due to the tax increase on the new appraised values of these homes. Even the investor buying has seem to slowed down. People can not afford the monthly payments and as an investor, there is not much room for cash flow.

Now after saying all of this, do yu think it is still a good time to buy properties. If so, what would be my best plan attact?

Also, can you really but investment properties with no money down?

My18 yr old son and I would like to learn to make money in Real Estate. :slight_smile:

Thank you all
Dee

2

that’s the funny thing about RE - it’s alot of capitolizing on peoples misfortune [and stupidity].

do you have any experience in real estate?

3

Not as an investor, I have been to seminars and have collected and read alot of material.

There are so many different ways to go about searching out and purchasing properties, that it is overwhelming. Ya know, can not see the trees for the forest.

I am a hands on learner, I guess what I need is a mentor.

:slight_smile:

4

It’s similar to investing in the stock market. When the market is down and people are running for the exits smart investors are putting more money into the market because they get more value for each dollar they invest. But unlike the RE market you have no control over the value of those companies in which you invest. As a real estate investor you have the opportunity to find and invest in situations that may be profitable. Also, if you are a rehabber you create value through your work on the property or your imagination and coordination in the work of others on the property.

5

I would sit tight and wait a little while. If you watch what is happening in the bond market it looks very likely that the USA will be entering a recession shortly. That combined with all the no money down financing which eventually converts to an ARM you’re gonna have a lot of real estate to choose from. Be patient. And remember this… You don’t get a great deal on a used car at a car dealership. You get one by finding the owner who HAS to sell. I use this analogy all the time… If a realtor has it, it’s too late. Now I’m not saying you can’t make money on properties listed with realtors. But the absolute best deals I have ever done, the home runs, came from dealing directly with an owner who had to sell.

6

I believe the best time to invest is now. It doesn’t matter if now is a strong buyer’s market, or a strong seller’s market. There’s always an excuse not to invest. Not yet the bottom of a market or I missed the bottom of the market.

Regardless of the market, I recommend by investor clients look for properties that they can get on their terms. I refuse to look at listed prices on properties listed by realtors. It’s irrelevant to me.

I determine what market value is when the property is in immaculate condition. I recommend backing off of that 3-5% given that we want the property to sell quickly. Since we are in a transitioning market, we might stretch that to 7%.

We deduct acquisition, rehab and carrying costs as well as desired profit. That determines the price we offer. The offer will either be accepted, countered or rejected. If it’s rejected, we move on to the next property.

The best time to invest is NOW. Just make sure you get the property on your terms. Don’t let your anxiety to get started push into a bad deal. No deal is better than a bad deal.

7

Once again, excellent advice!! If half the realtors I deal with had half your common sense it would make my life a lot easier. You are a rare find in this business.

8

Dee,

Realizing that I’m slightly biased, an excellent source of information for the beginning / wannabe investor is Gary Keller’s book, Millionaire Real Estate Investor.

It’s not a program, or a book of tips and tricks that real estate investors use.

Gary and his team interviewed 120 millionaire real estate investors looking for the common things that they did to become millionaires.

For example, a key component is to be revenue driven. Take a hard critical look at your personal monthly expenses. If you do this, you’ll find money that you’re currently spending on cable, dinners out, etc, that could be used for investing.

Determine your criteria for the property you want to control. It doesn’t matter what that criteria is, as long as you have criteria. If the property under consideration doesn’t match your criteria, move on.

I’m slightly biased in that I’m a Realtor for Keller Williams. However, it was because of Gary’s systematic approach to investing that I joined the firm. Again, this is not a tips, tricks and secrets book. It should however be the book that forms the foundation for your investment career.

9

Paulchase, I look forward to reading the book, thank you.

Have you all noticed if the market is like this all around the country?

One of the realtors I know, told me the only people that seem to be looking to buy right now are those with 486 credit scores.

So, would I be better off trying to buy somehting and putting in renter or something like a lease option?

I do not want to get into a mortgage payment (PITI) that is higher then the rent.

There are so many ads in the paper, We Buy Houses…,
What do I do, put in an ad like everyone else. Look up the court records for foreclosure or les pendens, or the mls for something that has been setting for 6mos? There are all the trees,
Do I bird dog, assignables,use a hard money lender and flip ( or try in this market).

Please advise ???

10

Bird dogging and advertising are good ways to start. In Tom Lucier’s book “The Pre-Foreclosure Property Investor’s Kit”, it is recommended that you go to the county house and not leave until you speak to someone who works in the office where the notice of defaults or lis penduns are filed.

Many times this is the prothonotary, county recorder, circuit court clerk, county court clerk, registrar or bureau of conveyances. More and more counties are providing these records online. It’ll be worth spending a couple of hours at the courthouse to learn the system.

Some government employees are well deserving of their reputation as being a pain in the donkey. Others are very willing to help. Asks lots of questions until you thoroughly understand the system.

Every county is different, so you’re more or less on your own to find out how your county works.

11

I agree with paul, any market is a great market to buy in. If there is only one investor out there making money in my market, then that means that I can as well.

Our market stinks and I will still make six figures flipping and wholesaling part time.

Dont use a slow market as an excuse to not invest, if the market is low then buy low and sell low. If the market is great then you buy high and sell high. If the market is sinking fast, buy low, and wholesale low. Not rocket science.

Eric Medemar

12

Thank you. Glad to see I’m not the only one thinking like this.

13

Makes since.

I can go to the clerks web site and pull up the foresclosures coming up and pull up last names a random to see what type of activity has been going on, like judgements, lis pendens, etc.
At that point, would you recommend a mail out to them, phone call or a drop by. They are probably being boombarded by other investors, what can I do or say to make them feel confortable and be willing to speak to me?

From your experience, what approach is recommended?

14

Again I go back to Tom Lucier’s book. I use direct mail. It’s difficult to catch people at home and depending on the neighborhood, you’re very likely to get shot, smacked with a hammer or physically or verbally abused.

The DNC list not withstanding, tracking down phone numbers is a waste of time. Even if you can find a working telephone number, people will not answer the phone. They let VM screen the calls.

Direct mail is cheap, easy and effective. I use a series of 5 letters spaced over the reinstatement period. In Texas, I understand this is 21 days. In PA, it’s about 6 months.

I’m using a slightly modified version of the letters in Lucier’s book. My response rate is a little over 2%. Anybody who has done anykind of direct mail will tell you that’s above average.

I’m happy to answer your questions, but you’ll do better if you buy, read and study Lucier’s book. It’s a no nonsense, how to book. He has a mimimum of stories and lots of useful how-to. The stories are included to make a point. He doesn’t spend time telling you how much money you can make. The how much is directly proportional to the how hard you work.

Contrary to popular opinion, pre-foreclosures are not easy. They’re only fun if your sick and demented like me, but they can be profitable if your disciplined and persistant.

15

HAHA… I think I would like to stay in one peice on this earth for a little while longer.

Did yu come up with the five letters you send out yourself or is it something you got from someone else??

Thank you for your insight and advice. :slight_smile:

Will the book also cover information on assigning contracts?

From what I understand, if I was to assign a contract over to someone else, they would have to be cash buyers, because lenders do not like assignable contracts. What have you learned about assignable contracts?

16

As I said in one previous post somewhere, I use slighly modified versions of the letters in Lucier’s book. Since I’m a realtor working on behalf of clients, assigning contracts is not an issue. My clients take title, rehab and then flip.

My first thought would be to work out an option contract. Not beat a dead horse, but Lucier has an equally excellent book on options.

17

I disagree with the others. There are markets where it is absolutely foolish to buy with the intent of reselling. In my area of Ohio, NOTHING is moving and I mean nothing! Real estate brokers that have been in business for decades are singing the blues. I have done a few wholesale deals in the past, but I would not buy a wholesale deal at this point. It is VERY difficult to wholesale if there is little to no retail activity. Who are you going to wholesale to???

The real estate fad is over. Newbie investors from the past few years are being driven from the market in the millions. In the past, there was always a greater fool to sell to. That is no longer the case.

This is a good time to be a landlord, IF YOU UNDERSTAND THE BUSINESS AND ARE WILLING TO WORK HARD.

Mike

18

Don’t misunderstand. Wholesaling may not be appropiate in all markets all the time, but it’s always the time to invest. The bottom of the market cycle is a good time for those who want to buy and hold.

For the wholesaler, in general, you just have to buy at a steeper discount.

Paul

19

I might agree with the people who advise not to buy in a bad market, if I wasnt making so much money in our terrible market. Old time realtors in our market say they havent seen the market so slow in 17 years, most investors I know say they have never seen it so bad, but they are all kicking themselves for buying when the market was great. Why? Because now those same properties that they bought when things were great are now selling for 20%-30% less.

Yes it is a great time to buy and hold. I have to disagree with the property manager on the wholesaling, and rehabbing part heres why:

I will use some properties that I purchased in the past 2 weeks as an example.

1700 Buchanan a 3 unit

Sold in 2000 for 71,000
Sold in 2003 for 87,000
2003 is when most investors were buying in my market because the market was good. Good market=High prices

I just purchased this same home for $36,000 bad market=low prices

Yes the market is bad, but why not buy, our market is down 10-15%, and I am buying at 50%, so if I need to sell and make a quick $10k I could do this at 30-40% under market value. Economics dont lie, if you offer the best product at the best price the market will be knocking your door down, regardless of market conditions. Instead I will buy this, put $10k into it for a total of $46k then rent it out for $1400/mo, I think I might cashflow just a little. Then I will sell either now for around $70k and make roughly $20k after expenses, or hold out till our market comes around and sell for $85,000-$90,000

1222 Eastern
Went into foreclosure at $59,200
The 2 unit next door that isnt even close to as nice sold for $68k
Bought in 04 when the market was great.

I just purchased this 2 unit for $30,500 yes, our market is bad, and yes I did buy

I bought this property for under 50% of ARV, I completed the contracts on this one today, and sold it for $42k. I just finished signing my buy/sell today for $30,500.

If the bank will allow the assingnmet I will make roughly $10,000 if they make me use a back to back close I will make roughly $9,000.

Keep in mind our market is terrible and most investors that I know are not buying. Maybe I should have past on this one and just waited till the experts said to buy.

I spent less than 10mins in this home, and 30 min going to check out the property records. I will make at worst $9,000. I had contracts to sell it signed before I had completed my contracts to buy. So if my closing takes 20 mins which it should because the guy buying has cash, I will make a measly $150 a minute, meanwhile the experts keep saying dont buy, the market is bad.

1003 Logan

went into foreclosure at $53,906
Sold for $50,000 in 2004 when the market was great great market=high prices.

I purchased this for $21,500 and may end up getting it for $18,500 if things go my way.

This home needs about $4,000 in repairs to be really nice, I could rent it for $500 and it will cash flow decent, or I could wholesale it for around $30k, or I could do a 2 year lease option on it for 45k. What I will probably do is wait out the market on this one because there are new condos going up only about 100 yards away that are selling for $160k,

In a good market I should be able to sell this home to an owner occupant for $60k-$65k, or to an investor for $55k, so I may wait for the good market on this one.

But what about all of the people who bought in the good market before, how could they go wrong after all the market was good.

For the landlords, Let me ask you, if you buy when the market is at the bottom, and in 5 years it returns to the bottom, wont you be miles farther ahead, than people who bought when it was good and now are right back at the bottom with you. Except they owe double what you do, because they bought during the good market. Not to mention the huge loss in cashflow because of the higher purchase price.

It is really a non issue, I dont think that anyone will argue that when the market is good it is good because people are buying, which means demand is up and economics will tell you when demand is up, prices go up. Now when the market is down or “bad”, then demand is down which makes prices go down.

So from this, it would be safe to say that if you buy in a bad market you would pay a lower price, and if you buy in a good market you would buy for a higher price.

So why would any investor capable of carrying homes in their portfolio decide that it is smarter to buy in a good market when prices are high, than in a bad market when prices are low?

I see our current bad market, as the perfect storm. Rates are low, and the markets slow. Which means money is cheap to borrow and homes are cheap to buy.

From what I can tell, smart investors figure they will wait till the market is good and prices are up and rates are up. Which makes homes more expensive and money more expensive. Forming the perfect time to buy?

Eric Medemar

20

Eric,

You don’t seem to understand what is going on in the market. People are not saying to wait until the market is good to buy, people are simply saying that it is risky to buy in a declining market. The reason is that unless you buy at a BIG discount, then by the time you rehab and sell, the property will be worth less than when you purchased it. The other issue in this market is that as you correctly stated, most investors are not buying. So, if you are in the wholesale business, who will you wholesale to if not an investor? Your ecomony may be doing better than ours here in Ohio, but in my area, almost nothing is moving. The market has ground to a screeching halt. Inventories are extremely high; days on the market are extremely high; and prices have just begun to fall. If history repeats itself, it has a long way to go and will not reach bottom until early 2008. Then, it will take 8 to 10 years before we once again reach the inflation adjusted prices of 2005. That is why a lot of the smart money is sitting on the sidelines. They are waiting for the market to bottom and will begin buying as the market turns upward. It is not about the price level, it is all about the trend. Right now, the trend is down and likely will be for another year and a quarter.

IF (and that’s a big if), you can buy at a discount and still have someone to wholesale to, then obviously it is a good idea to proceed. The trick is to not get overextended in this declining market. In my opinion, this is no time to act recklessly. It is like a game of musical chairs. You don’t want to be the one standing (with a bunch or properties that you can’t sell) when the music stops. I have seen a LOT of investors get into this situation and it can be painful. Smart investors know when to buy with reckless abandon and when to exercise caution.

Quite frankly, you have done a lot of bragging. You claim to be making a fortune, but then again you got caught not knowing even the most basic facts about rentals, even though you claim to have a bunch of them. Based on that alone, you better be making a bunch with your wholesaling, because I’m quite sure that you don’t know what you’re doing with rentals. That makes me question everything you say. You play fast and loose with numbers. Being in business is ALL about the numbers. In addition, you are clearly pawning your services, which makes me even more suspicious.

Caveat emptor.

Mike