Making Money In Real Estate During A Recession
We all can recollect recessions from the3 past, how could we forget? The real estate market falters and grabs everything in its path on the way down. However, what we seem to forget is that as the market falls, it always shoots back up.
You can make money in real estate during a recession if you look at the long term investment instead of the short term flip sale. When the economy was flourishing, people were purchasing new construction homes at the onset of construction and then selling them to another buyer once construction was completed. Homes were appreciating in value at such an accelerated rate that this was possible to do and quite profitable. This practice was known as real estate flipping.
Remember all those infomercials that talked about making millions in real estate overnight? They were instructing people to flip homes. Because so many people go in on the action, it actually generated a false market for new construction in some areas and over inflated prices of homes in others. It finally became evident that there were more investors than buyers and the market crashed. It is Economics 101 - the law of supply and demand.
Now that the supply is so high on all sorts of residential real estate, anyone seeking to buy has their pick of many different choices. Not only that, but there is also another incentive to investing in a down real estate market. In the past, when the real estate market crashed, the mortgage rates were usually around 12 percent. Now they are down below 6 percent. The Federal Reserve keeps cutting the rates in a sorry effort to boost the economy, as this has worked in the past. As a result, you have houses priced lower than market value, a wide range of homes in foreclosure, even in upscale neighborhoods and low interest rates.
You can make money with the long term investment in several ways. One way is to actually buy a home where you plan to live. You can get more bang for your buck than ever before, especially if you buy a foreclosure in an upscale neighborhood. In most cases, you can get the home for a fraction of its value.
Another way to make money in the down market is to buy low-priced residential real estate that is in foreclosure or on its way to foreclosure and rent it out. You can even rent the property to people who are on the threshold of foreclosure with an option to buy back the property. You will have the property and a nice profit if and when they ever buy the property back from you. In the meantime, you are holding on to a piece of property where you have solid renters who will most likely take care of the home.
Yet another way is to buy new construction or somewhat constructed homes and complete the construction in order to sell them. Many residential contractors have already gone bankrupt and others are on their way. You can pick up partially constructed homes for a fraction of their worth.
Remember that this is the time to buy and that you should buy as cheap as possible and plan on holding onto the property for a few years until the economy rebounds.
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