How do you make money in a Falling Real Estate Market?

Question

I would be intrested to hear ideas about how people are making money with the prices of real estate falling?

Answer 1

I am have two rental/investment homes near an Army base where I am stationed. The first home I bought was close to 20%below appraised value because the home owners (Military) had to move soon and didn't want to stress about the home sitting on the market. So they sold and rented it back from me for the just over the amount of the payment. Once they moved I had it rented to another Military member within hours. My other home was from somebody (civilian) who's job was moving and I got it for about 10% below appraisal and had a renter (Military) before I closed on the property.

You need to check your area. Before I bought I called many places as if I was a renter and also followed the classified and found out how quickly rentals were rented and the time of year that was hot. People in my area pay more for renting than they would on a payment but they are usually here for only two years and don't want to buy.

My area is unique, if you can't identify your market my advice would be not to do it. I am also fairly new to this so understand my advice may not be the best.

Answer 2

Real Estate operates differently from other markets, such as the stock market. Now I am assuming that you talking about homes, rather than commerical estate.

When it comes to homes, people usually don't sell for less than what they paid for their house. Unless they have to sell, they won't sell. So a depressed market doesn't end up in a crash as such, because people hold on to what they have.

But some people have to sell, for example, deceased estates, moving cities, or you have banks selling a property to recover a loan.

Which means you can buy now when it is low, and look to make profit when the market kicks back it (long-term investment). This long term investment means you are looking for places where there is a range of investment and commercial development.

But also there will be some areas growing, while others are depressed. You have to watch out for those areas. You have advantage of being able to buy as an investor while private buyers keep out of the market.

Also, in economically depressed times people are more likely to rent than buy, meaning that the rental returns on a property will be better.

To sum up, while everyone knows you buy low sell high, most people buy high and sell low. Which means, that a falling market means that you will be able to buy low.

Answer 3

Buy a fixer upper in a large populated area. My friend purchased a fixer upper near me in N.Y last year at 440,000 (approx 25-5000 under market value) and just sold it for a $70,000 net profit. I am in contract now to purchase a home that needs work ( I am good with my hands and have friends who are plumbers, electricians,etc) for $425,000 (appraised at 485,000. I will put between $40,000-$60,000 into it and sell in 2 years or so when the market approves for approx $600,000 ( the value of homes in the area right now).

Answer 4

The rich people don't need the aggravation of buying houses and fixing them up. It is far easier to just clip coupons. Anyone who is thinking of buying a house in the next few years should be getting their financial ducks in a row. With clean credit, they will be able to get financing and pick out a home that suits them.

Answer 5

Best thing to do is to not invest. You'll make more money saving it in the bank (even with a small % return) then going negative. It's not a investment if it has not return.