Hi everyone!!
Does anyone think that now is a giood time to be investing in real estate? I would think not because of the mess that’s happening in the mortgage industry and the current credit crunch. I live on the south side of Chicago and am a little fearfull of starting, but want to really bad!!!
The reason I am scared is because it seems that home values a going down and nobody is buying. There are a million foreclosures around here and good opportunity to get a good price, but what if I can’t sell???
I don’t want to get stuck making payments on a high interest hard money loan that just may balloon before I can find a buyer!
Also, what kind of investors will buy from me if I were to wholesale it to them if they see the same things happening in the market.
I started to birddog for some investors and every deal I see out there just seems iffie. I need and want to make money in this beautiful game of investing but I just don’t think now is good time.
Let me now what you think about this, I am very curious to hear some good insight on the matter. Esspecially from some one around my neck of the woods…
Now is a difficult time to get into the flipping business, but it’s a good time to get into the rental business. It will be even better as prices go down.
Mike
That is exactly what I was thinking. But my wife will beg to differ, she is scared that we will rent to dead beats that will mess up are house and possible end up being a bigger problem in the future.
My response to her is that we weed out those dead beats by doing the lease option. Am I right? I think that this will bring in more serious people because I will have them give me a down payment. Then they will be out serious money if they don’t come through on the deal.
Are you thinking straight hold and rent the property? I cannot do that because I need to get out of a hard money loan because that’s the only way I can buy?
With the craze that occured over the past 3 to 5 years it made it difficult to find good cash flowing properties for rentals.
Generally speaking you had to resort to more “bottom of the barrel” properties…those in less desirable neighborhoods.
Now and in 2008 I think it’s possible to go after properties in better neighborhoods at prices at or near what you’d have paid in lesser areas a year or two ago.
That’s a good thing. You pick up higher quality, (more appreciable), assets…rent them out in the interim, (2008/2009)…then sell or hold on when the need for housing rebounds.
-Mike
All real estate is local and what works in one part of the country may not work where you are, but I think that what propertymanager said was basically right. There are many angles off of the rental business that are doing well also. You should try to solve the problems of the hordes of people that can’t get a loan (or because of the press think they can’t get a loan) because of this sub-prime mess but still want to own their homes. I am doing what I call a 12 month flip. I get the people in have them pay me an option up front ($3k to $5k) and pay me for 12 months of at least $200/month over the PITI, they pay for all the repairs and after the 12 months they refinance the house. My loan gets raid off, they get the deed and a fresh mortgage and I get the $40k difference between what I paid for the house and what they bought it for. When you add up what I make on that house it is the original option $5k, the 12 months of $200/month positive or $2400, plus the sold profit of $40k. That give me $47,400 which since it is 12 months ago is taxed at capital gain instead of ordinary income like you would a flip.
The key is that now there are a lot of really good house on the market and prices of those house are going down, so your supply of houses is very good. There is a growing number of people that want to rent those houses (the people that lost their house I the sub-prime mess didn’t fall off the face of the earth and they need a place to live). The economy is good which means people have jobs and that means that there is money to be made.
It is never a good time to buy with hard money if you do not know exactly where the money is coming from to pay off the hard money loan and exactly when you will have that money.
If you are going to buy and hold, or you might have to hold for longer than you want to, find another way to finance and do not use hard money.
However, as to whether it is a good time to buy or not, consider this.
You hear “buy low, sell high”? In order to really do that consistently, you have to do your purchasing contrary to the market. It’s not intuitive at all, and it is scary. You buy when everyone else is selling and you sell when everyone else is buying.
If prices have fallen through the floor in your area and everyone is feeling grim, can you recognize that this is a “low” market? You know, the same low that is in “buy low sell high”?
If everyone is feeling no hope and prices are low, you can go in and make lowball offers and get them accepted. Sellers are afraid it is the only offer they will get.
You’d have to get them extra cheap and fix them extra fast if you are thinking of flipping. To me, a low market is the type of market to be buying to hold.
Now… as to whether or not it is a good idea to be buying in Chiago, I don’ know that market. You have to consider the job situation. Without jobs, people can not pay mortgages or rent.
You have to consider whether the population is growing or shrinking. If people are leaving, there is no demand for housing. If people are moving in, there is increased demand for housing.
You also have to consideer the quality of the tenant pool if you are going to buy and hold. There should be a lot more tenants if no one can qualify for a mortgage, but are they good honest working class people, or are they welfare deadbeats?
The rental business can be awfully tough if the only tenants available are going to tear up your house and not pay the rent.
Rentals are the business to be in for now. But with the Feds freezing rates soon home buyers will be at it again. Flips are still a really good business if you buy cheap and sell low.
many sellers are trying to rent for cash evne if they are negative.
In that market I would have a renter in 2 weeks, 12 months ago, now there is 11 houses for sale that avilable for lease. My tenant of 3.5 years got busted for growing pot in my house so he is out (in jail).
That’s your problem. You’re listening to your wife. :cool
ouch
it never really a bad time to invest in real estate. You just have to be smart about it. Adjust your strategy according to the market your in and the state of the local economy.
Two years ago it was crazy to buy and hold - flipping was the way to go. Now its a little more difficult since everything isnt appreciating at 20% a year.
Cash flowing properties are always difficult - but Ive seen a lot of situation where people bought properties and they didn’t cash flow on day one but after 2 or 3 years and a few rent increases - they have some great rental properties now
‘Now’ is always a good time to invest in real estate. Just remember that there are always emerging markets around the country, and that it is often a matter of being associated with the right group of folks to learn where those markets are.
As an example, through my business associates around the country I have been made aware of 6-8 markets where I can invest and make money right away. Through an investor friend locally (PacNW), I’m aware of another 2-3 markets nationally from our discussions. The point is, as I said in the beginning, ‘Now’ is always a good time to invest in real estate. If where you live isn’t a particular good market right now, don’t get stuck in that. Remote ownership of investment properties doesn’t have to be the spectre that some say it is, and a smart investor will always have a solid team working for them wherever they invest.
EmeraldCascade,
How many long distance rentals do YOU actually own?
Mike
Good question Mike…all of the NRU kooks preach the same thing. Why don’t you stick with your local market? It sure will save a lot of potentail headaches…