|
 Over the past few years many real
estate investors have been able to buy and sell property and make a
healthy profit without having to do anything but hold onto the property
for a few weeks or months. As the market cools, easy profits are no
longer there for the taking.
In a slowing market it's still possible to make sound investments
with careful analysis before buying. (This means that if you've managed
to make money to-date without careful analysis you should be warned that
it's easy to lose money by over-paying for a property and finding you
can no longer sell it for an automatic markup on what you paid).
A cooling market is indicated by an oversupply of homes compared to
the demand. This can be brought about by buyers dropping out of the
market and/or by too many sellers listing property for sale at the same
time. Initially, a market moving from under-supply to over-supply can
see to a big swing to a buyers market as buyers hold back, wary of
over-paying, and sellers rush to sell before the market drops.
This process naturally levels out as the sellers that don't need to
sell take their properties off the market.
Shop around for owners who need to sell and who are willing to
negotiate a lower price to get a quick sale. Don't forget to factor in
your costs to renovate the property and make a profit after sales
commissions. If the price isn't right for you, simply move on to another
property; don't get emotionally involved in any single property, as
there will always be another to replace it.
Rental Investments
Many investors look for good rental properties to be able to generate
a positive cash flow (i.e. rental income less expenses and cost of
capital is a positive number).
For larger apartment buildings where the cost of the property is a
factor of the income being generated, the prices will remain steady so
long as rental rates in your area remain strong.
Smaller two or three-family buildings can see a drop in prices as
demand drops for property in an area. With multi-family units you may be
able to purchase a property at a lower price simply because the existing
investor is looking for a short-term gain and you may be interested in
the longer-term appreciation. A good deal is where both seller and buyer
compromise equally to get close to what they want.
Condo Conversions
Converting multi-family properties to condos has become increasingly
popular in some markets. This can be a great way to increase the value
of a multi-family property, but you should check with your attorney
before making an offer. Some states have onerous requirements for
notification of existing tenants of intent to convert to condos. If your
state requires existing tenants to be notified months or years in
advance of a conversion, ask your attorney about putting together an
option to purchase. If the seller is willing, this can give you the
ability to complete the deal at a later date and gives you the ability
to renegotiate if the property prices fall in the meantime.
Foreclosures
As interest rates rise, the number of foreclosures will increase,
especially since so many buyers have been able to buy with 100%
financing. With no equity to lose, owners are more willing to hand the
keys over to the bank.
The key to buying right at a foreclosure auction is to do your
homework beforehand. You need to know the value of the home in your
present market if you had to sell it quick. If you have a Home Investor
Specialist as a member of your team, you can get them to give you the
appraisal. (Even though they won't get a commission they should be
willing to help you if you have built up a good relationship with them
over a few prior deals).
Go into the auction knowing your top number and be rigid in not going
above it. Start out by waiting to see who is bidding and how far the
early bidders take the price. If it is still in your range when there is
only one bidder left, begin bidding at that point.
The better strategy if you can achieve it is to buy the property from
the seller before the sale at a price that is acceptable to the bank and
the seller. If you do this you should be looking to buy 10% to 20% below
market value.
Add your comments
to this page by clicking here to view our WIKI editable site |
