Real estate, as well as the stock market is all about timing. In a business, they say you have to be at the right place with the right product at the right time. In most of the areas, prices of real estate after 2006 had gone down. Areas like Nevada, California, New York, and Florida had taken a hit of 30% to 40%. But these states had also grown by 100%. Prices of houses in these states from 2001 to 2005 had doubled in some places.

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In the years 2008, prices are still going down in these states and there are no buyers. But states like Georgia, North Carolina, South Carolina, and some other states, prices are going up at a reasonable rate. These states did not have a bubble; rather prices were depressed for a long time. A lot of smart retirees and investors who made healthy profits during the boom period made some good money and sold their houses before the bubble started busting up, and then moved out of these states and invested in other states where they could find the same homes at sometimes less than ¼ of the price of what they would have paid in New York and California. Florida was considered a cheap place to live, where your money could buy a nice home and taxes were low.

Then, in the last few years, the government raised the taxes, and then insurance went up double because of a few hurricanes they had, as well as prices of homes, they also doubled. Florida also had a big construction boom. Now builders as well as speculators are sitting with a lot of inventory which is not sold and there are no buyers for it. Florida has a lot of British and South Americans coming in who are buying because properties are very cheap as our dollar has lost so much value against their currencies. As Florida has a lot of Spanish population, a lot of South Americans love Florida. If any of these South American countries have some radical political leader coming in, then people will move out and invest in Florida. It will be a safe haven to park and invest their money. In the year 2008, when some of the high-rise buildings will be finished, Miami will have more than 20,000 condos which will be available for sale or lease. A lot of people who had put their deposits of up to 20% on these construction buildings have decided not to buy them, and later on their deposits are forfeited. Some of the builders are selling their new condos at 2005 prices plus whatever deposits they have received, they will give you credit for more.

Now depending on the time of market when you are buying. In the years 2002 to 2006 and in the sellers markets when people overbid , it was very rare to find residential properties 40% below value. At one point in 2004 to 2005, people were giving more than the asking price in some areas, but at the same time, there were still distressed sales and properties were sold at the courthouse below value. One should never buy properties at bubble prices. Like the stock market, if you bought the stocks at an inflated value, then you will lose. The real estate, as well as the stock market, they all crash. The real estate does not crash as bad as the stock market and does not affect a common person who is living in his own house. It does not matter too much if the prices of the real estate go up or go down. If it has gone down, it is bound to come back. You cannot easily create more land as well as develop more land. The cost of development as well as building is skyrocketing every day.

Look for people when they bought homes with a purpose to speculate, they borrow money for speculation and now they don’t have money to pay for their mortgages and other expenses on the building. They have to give away this real estate or sell it, sometimes a lot below what they paid for it and take the losses, because they don’t want their credit to go bad, banks will not lend any more money to them at any cost, which has a deadly effect: they end up losing everything, whatever they have. Some people have a small portfolio of 4 houses, which they can make sometimes in 4 years, because they can leverage these properties. A lot of people, for example, bought homes for $100,000, put $20,000 into renovation, and sold them for $150,000 in 3 to 6 months which was a very healthy profit when the market was hot.

It is very strange sometimes when people buy things that other people are buying. Just because the other guy made money, they think they can make money. But have you done your homework? A house in an average neighborhood which was sold for $100,000 three years ago is now being sold for $200,000. How much higher can it go in the next few years now? It won’t, because somebody who is smart will sell that home at that price and cash up his profits. Ignorant people have read some book like “Become a Millionaire” which never explained that if you don’t buy it right, you are never going to make money out of real estate.

So do your homework and you can become a multimillionaire if you know how to buy it right. When and how much you should buy your home is one of the most important financial decision you will make in your life time.

Option To Lease Or Buy From Your Landlord

Now let us say before you read this book that you were renting the house and you had three months to go before you lease expires. Ask your landlord if he intends to sell the house or condo in which you are living. If he is one of those investors who is stuck with old property and had bought it 5 years ago with an intention of making profits and now is tired and wants to cash up some of his profits, he might sell you the house or give you an option to buy his place after 2 years if you are not ready now to buy it. A lot of landlords are scared to lose their tenants if they are already sitting on some properties which are empty or occupied by the tenants who have not paid rent in many months. A lot of people also get old and want to sell their investment properties so they can retire and invest their money in bonds or mutual funds or use it for traveling or give it to their kids. So if your landlord is one of them then he might sell you the home at a very reasonable price. Now if you buy this property from your landlord and see that the rent that you pay him will pay for your mortgage interest, taxes, and insurance then jump into it. It may have to come out a little bit extra every month from your pocket, and then jump into this deal. Lock yourself into a 15-year fixed mortgage interest rate.

FINISH YOUR HOME WORK FIRST
I want to make it sure that you have done your homework before buying the house.

1. Have you found a good deal 20% to 40% below market value?
2. Have you found the house in the neighborhood where you wanted to be?
3. Have you done the math and found out what you can afford to spend on the home and negotiated the best closing costs and other appraisal and title insurance and survey costs?
4. Have you gotten the approval from some mortgage company to make it sure that they will lend you enough money for the house and the closing costs?
5. Have you visited the house and got it inspected to find out how much repairs are going to cost?
6. Do you have any savings left over in case some emergency comes up?
7. Have you found any agent who is going to make an offer on your behalf?

Sometimes you can find friends who are real estate agents and make them give some of their commissions that they earned from the seller back to you.

You have to be confident that this investment will bring you tenfold profit in no time and you are buying it right. Your real estate agent has brought you all the sales in the area, and you have visited and checked prices of homes which are for sale in that neighborhood.

By Ashok of http://becomerichinfiveyears.blogspot.com



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