Recent panic about the burst of the real estate bubble, dramatically low prices and high inventory completely overshadowed a positive side of the current real estate market-opportunities for investors. The message that falling price is the most lucrative component of real estate buying was completely lost in the choir of grouches (and media craziness that followed) about falling property values.
No doubt, millions of home owners suffered from the burst of the bubble, many had to give their houses up, others lost their equity; all in all, housing prices declined sharply signifying a real crisis. However, it would be foolish to forget that there are and will be people, many of them complete newbies, who are going to make a big profit exactly because property prices have declined.
According to Robert Kiyosaki, author of a bestseller “Rich Dad, Poor Dad,” there is a fortune to be made in real estate investing if you decide to take an action now, especially in buying rental units.
“Silicon Valley Mercury News” has recently reported that Bay Area real estate investors have gone on a shopping spree, snapping up homes in low-cost communities outside the region. It he third quarter of this year, for instance, buyers in the nine-county Bay Area purchased nearly 3,000 homes outside the region, up 58 percent from the same quarter last year, typically for prices well below 2008 levels.
The same “shopping spree” silently shook Detroit, where quite a few brokerage companies made nice profits by purchasing low-cost rental houses en mass and then reselling them to hungry hordes of investors. The smartest ones, who took time to gather intelligence about the area and circumvented the brokers, have been raking up profits ever since 2007.
Similar stories are repeated in Florida, Illinois and other states. Remember what investment guru Warren Buffet once had said? “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” Rental units in top condition and great location are plentiful and relatively easy to find. So the emphasis on quality is important.
This is not the time to buy apartment complexes that are ran own or built in shady neighborhoods. Unless you are an experienced broker and have a sixths sense about which neighborhood is about to change dramatically for the better, don’t bother with lengthy and costly renovations and don’t buy property in the places where you would not want to live yourself.
Before diving into the market as an investor, double check your credit score. A shrewd investor will not take any changes and guard every penny during the process of investing. Why pay more when mortgage rates are still at historic low?
Pay all your bills on time, turn down offers of a new credit, stop using bigger part of your credit cards whatsoever and keep monthly balances low on the rest.
You have at least 6 months, maybe even a year to fix your credit. By that time market will be like waking up bear at the best, so you’ll have enough time to capitalize on cheap rental units.
When on a lookout for a property to invest, give yourself enough time to gather the intelligence. Don’t rely on the Internet data only. Visit the area where you would like to invest, preferably several times and at least once during wee hours. Record the feeling in the streets in your head. Did you feel safe walking/driving in the area? Would you be comfortable putting your family/children in the apartment building you are about to purchase?
Have an inspector you know and trust check the house. In the current market there is no need to purchase a very old house or the one that for whatever reasons needs costly repair. Buy rental units with confidence and be ready to start making money, not worrying about spending more.
Profiting from rental units is all about the cash flow, not capital gains. Do your homework and rely on simple math before making an investment. Add up your mortgage payments, property taxes, insurance costs and maintenance, and subtract that figure from what you can reasonably charge for rent. The amount that’s left is your cash flow, your salary and your profit. Start small like this before moving to bigger, bolder, riskier investments.