http://www.entrepreneur.com/growthconference/index.html?cm_mmc=Growth2011-_-globalatlanta-_-Post-_-120817

Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”  -Warren Buffet

At the peak of the housing bubble, analysts touted real estate prices had nowhere to go but up.  Economists, bank CEO’s government leaders, most of the majority of the best minds in the world missed the coming biggest collapse of housing values since the Great Depression.  The public: teachers, accountants, bus drivers lined up to buy real estate following the herd mentality - buy because everyone is making money in real estate.   Long term success in real estate has never been based on a get rich quick theory.  Buying property in a down market, holding property long term, prudently managing property, and selling property during periods of market expansion is a time tested strategy for wealth. 

How do we know this is the time of a lifetime to buy?  We have experienced 3 years of economic decline.  Millions of buyers are unemployed.  Financing is extremely difficult to obtain.  Household formation  is at a 40 year low. Interest rates not seen since Truman was president. The nation’s largest seller Fannie Mae and Freddie Mac had 166,787 and 74,910 properties respectively, doubling since last year and expected to increase substantially despite dropping prices and offering incentive to move property off their books. Big banks and small banks  are failing in record numbers from growing inventories of non-performing assets; i.e. foreclosed real estate. The directive to bank management regulators, board of directors, and investors is clear; get those properties off your books.

RealtyTrac reports 24% all US residential sales in 2^nd quarter were foreclosed homes. The sales price of these homes was 26% lower than the sales prices of non-foreclosed homes. Foreclosure filings were reported on 332,172 properties in October 2010. October marks the 20th consecutive month where over 300,000 U.S. homeowners received a foreclosure notice,” said James J. Saccacio, chief executive officer at RealtyTrac. 

Where are the buyers that were rushing to pay sky high prices for real estate a short 3 years ago?  The herd has changed directions, advised by the same economists and pundits who preached sky high prices will never fall.  Today in unison, the economist and pundits are preaching there will be no recovery in rock bottom prices during the next decade.  The big question is will you profit from the today’s depressed market, the rush to sell, the fear of buyers, the pessimistic pronouncements of pundits?

Deeply discounted properties are a substantial part of the US housing market today. It appears the bottom is near.  In some areas, despite decades of inflation, properties can be purchase at prices far below their purchase prices in 2000, 1990 even 1980.  If you ever said, “I should have bought ten years ago when prices were low”, the market has given you a second chance.  Today, I am buying properties at prices lower than I sold them for in 1982.  Unbelievable! 

With the record number of foreclosures coming to market, the fire sale of properties is expected to continue for 12-24 months.  How do you profit from this perfect storm in US real estate markets? 

First assemble your cash, REO sellers prefer cash.  If this is not an option, obtain full approval for a loan, subject only to the property appraisal from a known, reputable lender. 

Second, assemble a knowledgeable team of professionals coordinated by an experienced REALTOR with experience in REO markets, investor properties and superior local market knowledge.  Such a REALTOR will have connections and recommendations for inspectors, appraisers, contractors, insurance providers, attorneys and property managers needed to execute a successful investment strategy. Buying a bank REO is not the same as buying a home from a traditional seller or builder.  Skill and knowledge in this market is critical to protect your interests.

Third, establish price and location parameters.  Determine the types of repair issues you are willing to consider.  Learn and understand the market you are considering; view listed properties, view sold properties, and call recent buyers to confirm the returns you expect are being received in the market.  How do trends in this market support your buy and hold strategy?  Will neighborhood and macro trends support your exit strategy when the general economy improves?

Last be prepared to move quickly.  Today’s investors are quick to identify a good buy.  In my market 25% of properties are under contract in less than 15 days.  The take away lesson, “You snooze, you lose” 

The biggest mistake new investors make is to waiting for the bottom.  No one can predict the bottom of the market.   Now is the time to buy.  Once the market realizes we are past the trough in values, herd mentality sets in and prices rise sharply.  By then, your easy and best returns are lost.  It is a long known fact, you make your money in real estate when you buy, it is realized when you sell.  Tomorrow’s millionaires are buying real estate today.  Seize the opportunity. 

If you have not owned a home in three years, you qualify as a first time home buyer. If you buy a home after April 9, 2008 and before July 1, 2009, you qualify for this credit. Call your friends who just bought a home since April 9th and tell them they may take $7,500 off their tax bill if they qualify. It has to be your principal residence, so rentals do not count.

The tax credit is 10% of the cost of the home, up to a maximum of $7,500. This is not an additional deduction that lowers the amount of income to be taxed, it is a tax credit. In other words, you take $7,500 off your tax bill. But there is a catch; the credit you receive now is actually an interest-free loan that must be repaid.

The loan has no interest, and will be paid back over 15 years. You get the credit on your 2008 taxes, but you start paying it back on your 2010 taxes that are due in 2011, so you get at least two years without a payment. You pay back 6.67% of the credit each year, so for a $7,500 credit the payment is $502.50 per year. If you stay put for 15 years, you pay it off with no interest.

What happens if you sell the house? You pay the balance back at the closing. So, you get $7,500 now, and pay the rest of it back if you make money on the sale of your house. What happens if you do not make enough money when you sell your house? They forgive the rest of the debt.

Other restrictions stipulate that you have to buy your first house in three years before July 1, 2009, not have super high income, not use bond financing and buy anywhere in the US.

If you'd like to learn more about this program, please call me!

Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability. Even though interest rates have gone up in the last six months, they are still near historic lows. Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates go up, it could cost you even more to service a mortgage on an identical home!

While a home is a major investment, it is also the center of your personal life. It's important to live in a home that reflects your taste and values, yet is within your financial "comfort zone." To that end, it may be more important to lock in today's relatively low interest rates and low home prices, rather than to hope for a further break in prices in the future.

Please give me a call if I can be of any assistance in determining how much home you can afford in today's market.