During the boom period of real estate from 2002-2006, there were a lot of players in the real estate investing arena. The sad part is that many of these people really did not understand how real estate markets work!!! Also, they did not understand how to effectively invest in real estate Abdo Romeo. What many of them did during this period of time was to buy a property for top dollar today banking on it being worth more tomorrow when they sold it. The flaw with that approach to investing is that it does not work in down markets or in stagnant markets. It is not an approach that is sustainable in all real estate markets. It is more speculative in nature than anything else. Therefore, there are a lot of people who were hurt financially from the down turn in property values when the real estate market changed, because they owed more than the property was worth overnight.
A comprehensive understanding of real estate market shifts is crucial to staying a head of the curve in real estate investing. Even more important is understanding how to successfully invest in any real estate market. No matter, if it is up, down or stagnant, you can make money investing in real estate if you remember one key thing, you make your money when you buy, NOT when you sell!!!
With that having been said, let’s go through the three steps to successfully investing in real estate in today’s economy. Before we get into the steps though, we need to make sure you understand the situation we are in right now. Lenders have tightened their lending criteria, thus there are fewer and fewer people who can qualify for financing in this current market. Also there is a backlog of literally thousands of properties that need to be, pending, or have been foreclosed on throughout the nation. Translation is that we have tons of discounted and distressed properties and a limited number of buyers to buy them.
What does that mean to us as real estate investors? Well, we need to find the buyers first, then the properties and then make offers on these properties. Let’s go into more detail on what I just said here.
The first step to successfully investing in properties today is to find and qualify the buyers. The people who have the money or who can qualify for financing are the people we want to focus our efforts on. We want to gain knowledge in what they are looking for and willing to pay for that property.
Next, we will take that information out and start looking for properties that meet their criteria. We will find a plethora of properties that will meet their needs. The property and the numbers associated with this property will need to be evaluated in detail to see if it is a true fit or not.
If the property meets the buyers needs and the numbers work for them as well as us, we can then prepare and submit an offer on the property. No matter what is going on in the mark in the near future, we are running the numbers based on today’s fair market value, with deductions take for costs associated with acquiring and holding this property, repairs, and even profit. As you can see, we will have enough room built into the deal when we buy that we can sell for smaller profit or worst case scenario break even if the market shifts drastically downward. However, the best case scenario is that we can make a great profit on the property if the market shifts upward. Either way, we have structured an offer that helps us make sure we make money when we buy and possibly even more when we sell.
In conclusion, the three steps to success in real estate investing today are to find and qualify buyers, then find properties for these buyers, and then structure the offer based on today’s prices with the total costs associated with the deal subtracted. It is the most effective and efficient way of doing deals in this real estate market. You will find consistency in the process and the number of deals you can close within a period of time. Oh and it will considerably reduce your stress load too. After all, you no longer will have to worry about whether you will find a buyer in time or not. It’s now time to work smarter, and not harder.