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San Diego real estate library
Making Money In Real Estate During A Recession
We all remember recessions from earlier periods, 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 instead of the short term flip sale.
When the economy was flourishing, 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 instructing people
to flip homes. Because so many people go in on the action, it
actually produced 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 wanting 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 numerous
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-priced 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.
Yet another way is to buy new construction or partially
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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