We’ve been talking about investing in the declining real estate market for a while, but there are a lot of people out there who are afraid to spend the amount of money it takes to get going in a declining real estate market. Here are five things to keep in mind when investing in a declining real estate market:
1) First, never pay full sales price. Most people will ask for prices equal to or close to their mortgage amount, just as if they had all the cards. They don’t, especially now that we are all facing a declining real estate market. Seriously appraise the property and decide if you want it. If it actually does, and it looks like it has the potential to be a return on your investment, then you should make an offer. Some spots can be had for as little as 20 percent off the sale price; That’s the beauty of buying in a declining real estate market. If they resist your price, you can walk away knowing that they will eventually put their feet down and realize that in a declining real estate market, there are very few buyers.
2) Second, think location, location, location. As the real estate market has grown in recent years, the locations of some housing developments have started to get really wacky; In the middle of nowhere, on one-lane roads, and with the most basic infrastructure, housing estates sprang up like mushrooms after a rain storm. You need to think strategically; desirable homes will be more centrally located when people finally realize that the credit crunch and housing market are making a comeback.
3) Real estate in a declining market is a long-term investment. You probably won’t be able to get rid of your investment anytime soon, but you should keep in mind that eventually, people will want to buy new homes again, and when the credit markets open up again, you’ll be sitting pretty. Be patient and you will make a neat package when you finally sell.
4) You won’t be able to sell a house in a falling housing market, so why bother? Don’t put more in a house than make it habitable; some people may be lucky to flip in some areas, but flipping is quickly becoming a thing of the past. Maximize your dollars and invest in multiple properties by rehabbing them only if necessary.
5) Become an owner. The landlords hold all the cards at the moment. Just because someone loses their home doesn’t mean they will be homeless. In fact, in many rental markets, there is a shortage of landlords who can rent to all the people who need houses. Being a homeowner can be seen as an interest return on your investment since a $200,000 house rented for $1,000 a month returns you $12,000, or 6% of the investment per year!