The buy and hold strategy
In the past say 8 years it was pretty common for investors to speculate in the market and accumulate large amounts of wealth quickly through buying properties, renovating them and putting them back on the market at a premium. Since the downturn of the economy there has been a staggering number of job losses, financial institution lending practices have stiffened and a flood of foreclosures have hit the market. All of these conditions have caused a correction in house prices, making it the perfect opportunity to buy properties at discounts to the actual value. Unlike in recent times, quickly turning around and selling a property for a profit is not very realistic. Holding properties and enjoying the cash flow from the properties would be the wise thing to do. No big surprise there, but with the large number of foreclosures on the market it is the perfect opportunity to buy distressed properties at a discount, renovate them and then rent them out. Why renovate? Although sales prices have declined, rental rates have remained strong in most markets. So having a more desirable property is to your advantage. Realtytrac recently reported that an estimated 92,000 homes were repossessed in the month of July alone, and all those families will be needing a place to stay. While you cannot know the reason for a family being forced out of their home, providing quality housing for those families can be to your benefit. The argument may be that families that have recently lost their homes are not going to pay rent either. That may be true in some cases but what about the families that are experiencing financial difficulties that are beyond their control, such as job loss or the death of the major wage earner. Providing quality housing for families that are trying to pick up the pieces from financial hard times is not only a smart business move, it is also I believe morally wise investing.
Saving your home if facing foreclosure
Investing in real estate also includes personal residences. To allow you home to be repossessed can be an incautious decision. I urge anyone who is currently a homeowner facing default to exhaust every resource possible to save their home from foreclosure. Because it has become so tough to qualify for a home loan, losing a home to repossession could set you back even further. If you are facing financial difficulties one way to overcome foreclosure is to take advantage of the government program Making Home Affordable. The program helps homeowners prevent foreclosure by modifying the mortgage, reducing the monthly payments to lower more manageable rates. The program also can help with refinancing loans into lower interest rate loans. There are qualifications for the programs but help is available. A more creative idea might include converting unused space or misused space into a rental unit. While this option does require money, the return on investment may be worth it. Not only will this provide extra income that can be applied to the mortgage it can also increase the value of your property. Trading your property for a more affordable property may also help your situation. While you may experience a “loss” in the transaction at least you can avoid taking a hit on your credit with a foreclosure leaving you in a better situation for when things turn around for you. As an investor trading one of your rental properties to a distressed seller can create a win-win situation for you and the distressed seller. If you ask the right questions, you can certainly find this opportunity. I am not going to tell you that it is easy to save your home from foreclosure but with a little thought and creativity it can be accomplished.
All and all real estate investing can be and still is a very powerful investment strategy even in times of economic downturn. Creativity and determination will play a very big part in your success. Coupled with a clear objective you can continue to flourish even when the odds are against you.
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