How Can Real Estate Investors Profit from the Home Buyers Tax Credit Extension?

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After having written my last several articles on current happenings in our market, I came away with the impression that I had become as bad as the regular media only focusing on the negative and never looking for the positive.  Overall, this negative crap just doesn’t work for me… but regrettably I acknowledge that it is not prudent to keep our head in the sand either!

With that in mind I am going to focus this article on an event that is positive news to those real estate investors who buy and sell into the homeowner market.

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The Homebuyer Tax Credit Extension

For those readers who keep abreast of these things, and it better be all of you, you know what I am about to discuss – the recent extension of the Home Buyers Tax Credit.  The new bill was signed into law on November 6th and essentially extends and expands the program.  The details of the program can be found in the UPI story, How the New Homebuyers Tax Credit Works.

In keeping with my commitment to focus on the positives of this bill, I want to discuss how each of you, as real estate investors, can position yourself between now and May 1st 2010 to profit from this program.

I will start with this premise…

There is a predominant opinion, supported by sales data, that we’re in a buyers market.  Meaning, that at certain price points, buyers are willing to buy in this market and, in my opinion, they will continue to buy as long as interest rates and prices represent value and affordability.

So, how do you profit?

  1. Find a great deal!  A great deal may be one that needs few repairs and can be purchased at 70% or less of comparable properties.  Or it may be a deal that needs more extensive repairs in which case you need to purchase it at less then 50% of the selling comparables.  Actually, I would be more comfortable with 40% or less as a purchase price.
  2. Assuming it needs little in the way of repairs you can do what many investors are doing today and list and sell it immediately to a homeowner buyer.  
  3. If the deal needs more work, you have the entire Winter to make the repairs. You’ll want to get it on the market in time for Spring, and under contract before the May 1st deadline.
  4. If you are only in the position to wholesale deals, the Homebuyer Credit plays right into your hands because many rehabbers don’t have the time to look for quality deals.  And since it looks like homeowner buyers are going to be kept in the market as a result of the credit, you know rehabbers are going to be very active.

While I realize that this is just an overview, the bottom line is this.

The Government has just given us a huge gift… even if we are paying for it with our taxes.  Take advantage of it in every way that you can.

Photo Credit: aussiegall

About Author

Peter is an active and successful real estate investor in the Baltimore Maryland region for the past 8 years and is one of the founders of The Club Mastermind a real estate investing coaching program focused on local coaches helping investors to perfect their game.

14 Comments

  1. Do you really think the credit has been and will continue to incentivize new buyers? It seems to me that it is such a pittance, except in some markets where homes are dirt cheap, that only people who were going to be buying in the first place would take advantage of it. What do you think?

  2. Linda,

    In my market, Baltimore Maryland, it has made huge difference. I believe Bloomberg did an analysis that indicated the credit was only used by 200,000 home buyers and the National Realtors Association is claiming something like 2,000,000. The truth is somewhere in the middle.

    Pete

  3. Good Morning!

    I bought my house 3 1/2 years ago that I live in. I have bought and flipped several starter houses in the last 5 years. I seem to fall in the categorie that is not qualifying for the extension….or the original 1st time tax credit. What am I missing, and how do I take advantage of this opportunity? I am closing on a home Nov. 20th.
    Brian

  4. I LOVE the new positive attitude…it’s what will get the whole economy back and was the secret of Ronald Regan: Confidence. I think this is a pretty damn good opportunity to get in the real estate market if you area has deflated prices…

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