In This Market? Are You Crazy? Why This Is The Best Time To Buy
When I tell people Im a real estate investor these days
, they think Im nuts. Based on what theyve read and heard, they assume that all of real estate is in the toilet and that my investments, and my life, are right there with it. Isnt it risky right now? Arent you worried? theyll ask.
The short answer is, No, Im not the least bit worried. Thats because smart real estate investing is one of the safest things you can do right now. (Relying on someone else for your paycheck, health insurance and retirement savings seems a lot riskier to me.) The reality is, this is one of the best markets Ive seen in 30 years of real estate investing if you know what youre doing.
Now, Im not about to give a free real estate investing seminar to every person I meet at a cocktail party. But Im sure youve had some of the same conversations, too. You may even have a few of those seeds of doubt yourself.
I cant blame you. You probably know some people who tried investing in the past and lost their shirts when the market tanked. Everyone around you is probably telling you youre crazy for even thinking about investing in real estate right now.
But Im here to tell you those people who lost their shirts didnt follow my formula. And youre crazy if you dont think about investing now.
The people who lost their shirts in the bubble gambled on quick turnarounds on single family properties in hot neighborhoods. They never had positive cash flow it was all a bet on market appreciation. When the market cooled and then froze over they were sunk. If I were doing that kind of investing, Id be worried and scared, too.
But thats not what I do. And thats why I was able to become financially independent before I turned 30, and havent looked back since. You can do the same if you follow my lead.
Heres what I do: buy multiple unit buildings in low to moderate income that will generate positive cash flow from day one. Its not rocket science just figure out the monthly expenses for the property (the financing payment, the taxes and fees, the utilities and maintenance) and subtract it from the total rent youll collect each month. If your rental income is more than your expenses, youve got positive cash flow. If you lose one tenant, youve still got two or three or four others paying you. (Think about it with a single family house or single unit rental, once youve lost your tenant youve lost 100% of your cash flow.)
Thats something you can do in any market. But this market is particularly good for three very specific reasons.
Reason #1: There are more distressed sellers and distressed properties now. What does that mean? Basically, a distressed seller is desperate to get rid of a property, for any number of reasons. Lets face it, a lot of people are struggling right now. Targeting distressed sellers isnt predatory youre actually helping them out. It just so happens youre going to help yourself at the same time. (Theres both an art and science to this approach which we teach as part of our coaching program to help investors find the best solution in each circumstance. For more about our coaching program, call ###).
A distressed property needs a little work to make it marketable. Noting major, just some cosmetic things like paint and landscaping to bring it up to par. Often, distressed sellers and distressed properties go together even better for you.
Distressed sellers and distressed properties both contribute to lower asking prices and greater availability of creative financing options. Which brings me to my second point
Reason #2: Alternative financing is more available than ever. Many people think you cant invest in real estate today because it is so difficult to get a loan. Its true that banks are tight with lending right now. But theres no reason why the seller couldnt be the bank.
Its called seller financing. And just like it sounds the owner acts like the bank and provides the financing to you, the buyer. In many cases, it can be done for no money down.
This is great for the beginning investor because your odds of getting a bank loan are even smaller than those of an experienced investor like me. Plus, the bureaucracy of bank lending eats up a lot of your time and energy things that youre better off putting in to finding more positive cash flow properties.
I dont have room here to get into the ins and outs of seller financing, but trust me, its a great option. I cover seller financing extensively in my training and mentoring programs call XXX to learn more.
Reason #3: The residential rental market is going strong. Ask your local real estate board about vacancy rates in your area chances are, rates have held steady around 5% in low to moderate income neighborhoods for years. Thats where you want to buy, because a low vacancy rate means positive cash flow for you.
Rents arent subject to market fluctuations. Most landlords have not lowered their rents over the last year because of the economy. Once leases are signed and your units are full, those rents arent going anywhere but up. And in this economy, the demand for affordable rentals is going to continue to climb.
by: Russ Whitney
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