Investment Properties: How to Make Great Money in a Down Market
Unfortunately for many people there hasn’t been a worse time in recent memory to be selling your home. But, fortunately for you if you’re in the market for investment properties there hasn’t been a better time to be finding some great deals! While buying investment property while it seems every day brings headlines of more foreclosures and woes in the housing market, if you’re looking at it in the right mindset, you should see nothing but opportunity, especially if you’re trying to find homes for cheap in a foreclosure auction
Why Is This a Good Time for Buying Investment Property?
So, why is this such a good time to invest in the real estate market? There are two main reasons, low interest rates and a cyclical low in the housing market.
• Low interest rates: Unprecedented Federal Reserve action has led to interest rates that are at near historic lows in an attempt to get people buying more property and other assets. By taking advantage of low interest rates from your bank, you can invest in property with a loan at rates you could only dream about a few years ago!
• A Cyclical Housing Low: Just like the seasons, the housing market always goes through price fluctuations. Right now, prices are at inflation-adjusted lows compared to other housing bottoms. While it remains to be seen when housing prices will recover, they always have in the past and you shouldn’t think this time will be any different. This is the perfect time to buy low and sell high longer down the road.
So what do you need to actually make money in this market?
The first, and most important thing that you need if you want to make money by investing in beachfront property, or any other kind of investment property is the right mindset. Buy homes and other properties to make money over the long term, not to get rich quick overnight.
It’s no secret that the days of flipping houses overnight for huge returns are over and nobody knows when the strength will return to the housing market. However, if you’re investing with a very long time horizon, it really doesn’t matter if we are in the bottom of prices or still in a declining phase. When prices do turn around you will have a nice return on your investment, but you’ll need the right mindset to ride out the downswing.
While there are ways that you can use other people’s money to start your investment property business, you really need to make sure that your finances are in order before you start looking for homes. At a minimum, you need good credit and a 20% down payment to get a good loan. This is important because the better the terms of the loan are, the more you will ultimately make on your ROI. One great way to find out if you’re getting the best terms on investment property loans is to check out a website like LendingTree Mortgage Loans, which allows you to compare rates from many different lenders at once. Getting started with Lending Tree has never been easier either! Just start by putting in your details below:
Another important consideration is that you will need money on hand that can pay for repairs to the property and to also cover any unexpected vacancies. If you don’t have this covered, even a slight dip in the market can completely break your fledgling business.
Find the Right Towns and Communities
The next step in buying investment property is making sure that you are choosing property in the right communities. Real estate is essentially a local endeavor, so every town or city will have different reactions to larger market movement.
The biggest determinants in property values are generally economic vitality and population growth. Make sure you look at these numbers and try to think about what is attractive about the city or two as well before you look at any property. Also make sure there aren’t any run down homes in the area and look at how fast houses are selling on the market. If houses are taking six to 12 months to sell, the market is moving extremely slow and you might be better off finding property elsewhere.
Locating the Right Property
Now that you’ve narrowed down the areas where you want to search, you have to determine which investment property for sale is the one that you will ultimately buy. First, start by doing your own due diligence on the property. Look at how much work is needed and what condition the house is in. Also try to calculate the cash flow of the property and the ROI you can expect.
The most important part of this is the price that you ultimately end up overpaying. While houses are sometimes passion purchases, most investment properties are bought after careful analysis. If you’re the sucker that buys the property for more than it is worth, you most likely won’t end up finding another one that will be willing to pay more.
Fortunately, finding great properties for less than market value has never been easiers. With the help of foreclosure, you can search nationwide for foreclosures on all kinds of properties that you can use for investment. To get started, but in your zip code below.
Take the Help of Others
Finally, don’t be afraid to let others help you during the process of finding and closing on real estate investments. If you want to get a deal done right, odds are you will need almost a small army of specialists to help you. Here are some of the most important people you will have to have help you:
• Real Estate Agents: Will help you analyze and pick out properties
• Attorneys: Can help with paperwork and making sure that all the legal papers are in order
• Contractor: To make repairs to the property
• Appraiser: To help you determine the fair value of the property
• Inspector: To make sure that there is nothing fundamentally wrong with the property before you buy it.
All in all, there has never been a better time to enter the market for investment property. If you have the right mindset and look to the long term, you can make sizeable gains over time through a combination of renting out the property and appreciation.