When Franklin D. Roosevelt addressed the nation during his first inauguration, he looked upon a tired and worn constituency, beaten down by the weight and immensity of the Great Depression. Many of the banks had closed shop, unemployment was astronomical and he knew that the only way he could get the country back on track was by challenging people to over come their number one obstacle, fear.
In his landmark speech, he boldly declared that the “only thing we have to fear, is fear itself!” Even though many decades have passed since FDR spoke those famous words, they remain true – now more than ever.
It is interesting how logic and behavior are so often at odds with one another. When people shop for clothes, they look for sales. When we shop for computers, we want discounts and opportunities to buy directly from the manufacturer. When novice investors buy real estate however, they get excited when prices are on the… rise.
No single person can control the market. Not Greenspan. Not Obama. Not Trump. Like any game, you have to have a strategy to profit from the conditions that are in front of you. Although most investors that are active in the market today haven’t seen a recession like this before, they know that there is enormous opportunity. In fact, some have labeled this as the best buying period of our lifetimes.
Compared to five short years ago, today’s market offers a host of advantages.
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- Adjusted for inflation, housing prices in some metropolitan statistical areas have fallen to back to levels not seen since the 70’s.
- Investors are able to purchase properties at prices that will immediately cash flow. In the hypermarket, investors often struggled to profitably rent properties unless they put 30% or more down. With prices at record lows and increased competition for rentals due to qualification barriers, new landlords are realizing increased profits.
- As a facet of the economic stimulus package, the federal and state governments are offering tax credits and other benefits for first time homebuyers. Albeit, investors typically cannot participate in these benefits directly, smart investors are positioning themselves to indirectly benefit by purchasing discount properties directly from banks and are profitably reselling them to first time homebuyers.
- In today’s market, seller financing has become a staple, especially for the commercial real estate category. When lenders make it hard for buyers to qualify, they are indirectly impeding sellers from being able to sell. This creates a perfect storm for seller financing. Remember the key to seller financing is an effective presentation.
- Closing costs are always a negotiating point, but in the midst of the hypermarket, it was common for the buyer to pay the closing costs, in order to make their offer stand out. Therefore, even if the buyer had 90% loan to value (LTV ) financing, they still had to come to closing with a fair amount of cash. Current financing is conventionally around 80% LTV; however, sellers are now stepping up and offering to pay all of the closing costs for a potential buyer. This reduces the cash that a buyer needs to bring to closing.
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This above list is only a short run-through of the common and obvious benefits of the current market. Less obvious, but enormously powerful strategies include subject-to offers contingent upon loan modifications and the shorting of subordinate financing.
In the end, the only thing that can hold a person back in this market is the fear of getting involved. Fear is a natural part of life, it cannot be avoided and to a small degree, it is a healthy emotion that causes us to double check our facts and figures.
What people have to ask themselves is whether or not they believe that there is money to be made in real estate. If your eyes are open, you will notice that money is being made – it is simply being made by savvy investors these days rather than any person who can qualify for a mortgage. The fact that real estate can be profitable is undeniable and if you didn’t believe this to be the case, you probably wouldn’t be reading this article.
If you answered, “yes” to the question about the potential to earn income from real estate, then the only question left to ask is what difference there is between you and the people who are succeeding in this market. I believe that the great divider between the real estate have’s and have not’s is training and confidence.
There are plenty of people who had all of the money in the world a few years ago and today they are hard stretched to pay monthly expenses. On the other hand, there are countless individuals today that are having trouble with monthly expenses; however, with the right training and support, soon will have all the money in the world.
Remember, your past and present don’t predict the future. If you are looking to discover financial freedom, this is simply the best opportunity to do so in decades… you just need to formulate a game plan based on the trends of the current market.
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