How do you Make Money when Prices are Falling?

Question

How do you Make Money when Prices are Falling?
(I will copy and paste the best answers on Your Creative Real Estate Investing Forum:
http://www.forumforme.com so others can learn from you.)
Thank you!

Answer 1

The 'secret' to making money in the real estate market is to find motivate sellers and to not focus on the property. In a buyer's market (a falling market) there are more motivated sellers. People who have their property listed in a falling market are not trying to catch a high price. They have real needs to sell.

Many techniques will work.

The strategy that does not work in a falling market is to buy and hold. Holding in a falling market can be a problem. You can minimize the down side if you do hold by having good cash flow. In most markets having good cash flow is a winner. In a down market it provides the ability to ride it out.

Short term holds (flips, refurbishments and other short term strategies) work just fine. Bank REO deals will generally be better as the bank has to unload the property. There will be way more speculators and others with dumb money chasing deals so less competition.

Also note that the public press can be wrong. The headlines all say the US housing market is heading down. Many cities are showing rising prices. What might be happening in one market is not likely to be the same in another market. You need to use a strategy that is correct for the local market.

Answer 2

Contrary to what some might assume you actually make a lot of money when buying as opposed to selling. The market determines your holding period and usage for the property. You can wait for a market to be most favorable for buyers as many areas are becomming now then buy at the lowest possible price. Cash flow it as a rental while the market turns around. If a property cannot cash flow as a rental then don't buy it. All markets have corrections from time to time, this last one came as no surprise. When the market starts its new appreciation ascent the equity growth will be measured by time and original cost. Hence making money when buying, selling is merely the conversion of equity into cash. Refinancing to access equity is the same thing with retention of the property. The more you pay the less margin will exist. A seller becomes desperate when a market slips and knows they must sell while the market price is at least enough to cover their loan balance. Todays panic is from the recent equity grab most homeowners took so little margin remains in many homes. The easiest way to stop prices from falling is for people to stop selling. Value doesnt change an existing loan payment in most cases. Wait for the inventory to get low and buyers will feel the panic and prices will go up.

Answer 3

After reading several articles, I have come to the conclusion that buying rental properties is the best thing to do. Let me explain...

1)Prices are low and foreclosures are at an all time high. One should be able to buy rentable units at low prices. Do research into where you should buy. Many large cities like NYC or LA have strong economies. Look into the suburbs of those areas or areas within commuting distance. As long as those economies stay strong, then it will continue to support the suburbs.

2)Subprime lenders are in the crapper. I believe the number two company in the nation is on the verge of going bankrupt. (Subprime lenders are lenders that lend to those with poor credit) I believe that will mean that lenders will be less apt to loan to those with less then optimal credit. You basically have three choices if you can't get a home loan. Live on the street, live with others (moms basement) or RENT. I think that is where you will make your money. Buy low, rent out, let renters pay the bills and build your equity, and when the cycle starts an uptick, sell, make more money and invest in larger buildings. That is what I am doing right now.

Answer 4

You know how they always say it's either a "buyers market" or a "sellers market?" Although that is totally true at that point in time, they are both a good thing! When it's a buyers market, your objective is to buy real estate. When it's a sellers market, your objective becomes to sell. Buy low, sell high! Pretty simple right? Downfall to this theory is sometimes your money gets tied up in the real estate until you get it all "turned over!" But, it's always "your" market! Just be capable enough to be on both sides!

Answer 5

Cowboy, this fiesta thing looks just that!! ... out of the days of 'cowboys'!!

$1 an hour, mate??!!

Gee, you'd find youtrself far more constructive elsewhere, surely!!
That kind of money level is out of cowboys' times, man!

Answer 6

Sell More!

Answer 7

buy put options, or sell short