We all can recollect recessions from the past, how could we forget?
The real estate market falters and grabs everything in its path on the
way down. However, what we seem to forget is that as the market falls,
it always shoots back up.
You can make money in real estate during a recession if you look at the
long term investment rather than the short term flip sale. When the
economy was thriving, people were purchasing new construction homes at
the onset of construction and then selling them to another buyer once
construction was completed. Homes were appreciating in value at such an
accelerated rate that this was possible to do and quite profitable. This
practice was known as real estate flipping.
Remember all those infomercials that talked about making millions in
real estate overnight? They were telling people to flip homes. Because
so many people go in on the action, it actually made a false market for
new construction in some areas and over inflated prices of homes in
others. It finally became evident that there were more investors than
buyers and the market crashed. It is Economics 101 - the law of supply
and demand.
Now that the supply is so high on all sorts of residential real estate,
anyone looking to buy has their pick of many different options. Not only
that, but there is also another incentive to investing in a down real
estate market. In the past, when the real estate market crashed, the
mortgage rates were usually around 12 percent. Now they are down below 6
percent. The Federal Reserve keeps cutting the rates in a sorry effort
to boost the economy, as this has worked in the past. As a result, you
have houses priced lower than market value, a wide range of homes in
foreclosure, even in upscale neighborhoods and low interest rates.
You can make money with the long term investment in many ways. One way
is to buy a home where you actually plan to live. You can get more bang
for your buck than ever before, especially if you buy a foreclosure in
an upscale neighborhood. In most cases, you can get the home for a
fraction of its value.
Another way to make money in the down market is to buy low-cost
residential real estate that is in foreclosure or on its way to
foreclosure and rent it out. You can even rent the property to people
who are on the threshold of foreclosure with an option to buy back the
property. You will have the property and a nice profit if and when they
ever buy the property back from you. In the meantime, you are holding on
to a piece of property where you have solid renters who will most likely
take care of the home.
One more way is to buy new construction or incompletely constructed
homes and complete the construction in order to sell them. Many
residential contractors have already gone bankrupt and others are on
their way. You can pick up partially constructed homes for a fraction of
their worth.
Remember that this is the time to buy and that you should buy as cheap
as possible and plan on holding onto the property for a few years until
the economy rebounds.
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