Lokking for ideas in a plummeting market?

Question

I'm looking for some unique investment strategies to use in this plumetting real estate market, please send me strategies that have been proven effective.

Dave P. · Answer

Peter,

Your "rules" don't particularly appear to be isolated to "down" markets. I would imagine that buying at a good price in good locations should always be part of the equation.

In addition, your example in rule five is probably a little over simplistic. I don't think many people on this forum would agree that a $1,000 rental on a $200,000 investment would return the results that they are looking for.

Peter Vekselman · Answer

5 Reasons to Invest in a Down Real Estate Market

Weâ€™ve been talking about investing in the down real estate market for a while now, but there are so many people out there who are afraid to plunk down the kind of money it takes to get going in a down real estate market. Here are five things you should keep in mind when investing in a down real estate market:
1)	First, do not ever pay full asking price. The majority of people will be asking for prices at or near the amount of their mortgage, as if they held all the cards. They donâ€™t, especially now that we are all facing a down real estate market. Seriously appraise the property and decide if you want it. If you really do, and it seems like it has the potential to be a return on your investment, then you should make an offer. Some places can be had for as low as a 20 per cent discount on the asking price; that is the beauty of purchasing in a down real estate market. If they balk at your price, you can walk away knowing that they will eventually come down to earth and realize that in a down real estate market, there are very few buyers.
2)	Second, think location, location, location. As the real estate market boomed the last couple of years, the locations for some housing developments started to become really whacky; out in the middle of nowhere, down one lane roads, and with the barest of infrastructures, housing tracts sprung up like mushrooms after a rain storm. You need to think strategically; the desirable houses will be more centrally located when people finally realize that the credit crunch and real estate market is making a come back.
3)	Real estate in a down market is a long term investment. You will probably not be able to unload your investment any time soon, but you should keep in mind that eventually, people will want to purchase new homes again, and when the credit markets do open back up, you will be sitting pretty. Be patient and you will make a tidy bundle when you finally do sell.
4)	You arenâ€™t going to be able to flip a house in a down real estate market, so why bother. Donâ€™t put more into a house than to make it habitable; some people may be lucky to flip in some areas, but flipping is quickly becoming a thing of the past. Maximize your dollars and invest in multiple properties while rehabilitating them only if necessary. 
5)	Become a land lord. Land lords are holding all the cards right now. Just because someone loses their house doesnâ€™t mean they are going to become homeless. In fact, in many rental markets, there is a shortage of landlords who can rent to all the people needing houses. Being a land lord can be seen as an interest return on your investment since a 200,000 dollar house rented for 1,000 dollars a month returns 12,000 dollars, or 6% on the investment per year!

Michael Rossi · Answer

Forget the "unique" strategies.  This is not a time for gimmicks and fads - that time has passed with the real estate bubble.  Fundamental businesses survive in any market.  I operate a rental property business, but certainly not because the real estate market is going up or down.  I operate it to generate cash flow and that must happen in every market phase.

So, I would suggest sticking to real time-tested businesses (like the rental property business or a thousand others).

Good Luck,

Mike

J Scott · Answer

Buy low.  Sell high.  Make positive cashflow in-between.