Making Money In Real Estate During A Recession
We all can recollect recessions from earlier periods, how could we
forget? The real estate market falters and grabs everything in its
path on the way down. However, what we seem to forget is that as the
market falls, it always shoots back up.
You can make money in real estate during a recession if you look at
the long term investment rather than the short term flip sale. When
the economy was flourishing, people were purchasing new construction
homes at the onset of construction and then selling them to another
buyer once construction was completed. Homes were appreciating in
value at such an accelerated rate that this was possible to do and
quite profitable. This practice was known as real estate flipping.
Remember all those infomercials that talked about making millions in
real estate overnight? They were teaching people to flip homes.
Because so many people go in on the action, it actually produced a
false market for new construction in some areas and over inflated
prices of homes in others. It finally became evident that there were
more investors than buyers and the market crashed. It is Economics
101 - the law of supply and demand.
Now that the supply is so high on all sorts of residential real
estate, anyone seeking to buy has their pick of many different
options. Not only that, but there is also another incentive to
investing in a down real estate market. In the past, when the real
estate market crashed, the mortgage rates were usually around 12
percent. Now they are down below 6 percent. The Federal Reserve
keeps cutting the rates in a sorry effort to boost the economy, as
this has worked in the past. As a result, you have houses priced
lower than market value, a wide range of homes in foreclosure, even
in upscale neighborhoods and low interest rates.
You can make money with the long term investment in numerous ways.
One way is to buy a home where you really plan to live. You can get
more bang for your buck than ever before, especially if you buy a
foreclosure in an upscale neighborhood. In most cases, you can get
the home for a fraction of its value.
Another way to make money in the down market is to buy inexpensive
residential real estate that is in foreclosure or on its way to
foreclosure and rent it out. You can even rent the property to
people who are on the verge of foreclosure with an option to buy
back the property. You will have the property and a nice profit if
and when they ever buy the property back from you. In the meantime,
you are holding on to a piece of property where you have solid
renters who will most likely take care of the home.
One more way is to buy new construction or somewhat constructed
homes and complete the construction in order to sell them. Many
residential contractors have already gone bankrupt and others are on
their way. You can pick up partially constructed homes for a
fraction of their worth.
Remember that this is the time to buy and that you should buy as
cheap as possible and plan on holding onto the property for a few
years until the economy rebounds.
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