After watching so many people losing their homes, their money and so many other things the past few months to a year, people are convinced that the best investment decision one can make in today’s recession is to stay away from the real estate market. Only a few people are financially intelligent enough to actually see the opportunity in this housing crash to make money and become wealthy.
It is a basic rule in the investing game which everybody knows that you should buy when the price is low and sell when the price is high. With a growing database of foreclosed homes in many US states, some people are actually making money during this housing market crash.
As the prices for foreclosed homes and even new homes continuous to drop every month, real estate investors are being lured back into the market. Just an example, the median price for foreclosed homes in Las Vegas is $99,000 for all cash deals.
However, before you decide to join their game, there are a few questions you need to ask before buying a home to invest:
What is the unemployment rate in that area?
Your new real estate investment is only valuable as long as there are jobs in the area. If a city’s major businesses have shrunk and jobs have disappeared because of that, the value of the homes in that city will also fall. This is the case with Detroit where the auto industry shrank and job disappeared, thus housing prices are low.
Also, if you are thinking of investing in a home to rent out in a city where jobs are more and more disappearing, there is a great chance that it will be extremely hard to find a tenant.
How many foreclosed homes are there in the area, and in that same street?
Some areas have turned into ghost towns because the owners have lost and left their homes, leaving only 1 or 2 families in the whole block. Although this may not necessarily be a bad thing, you need to consider what the crime rates are there. Foreclosed towns with many empty houses in one neighborhood have experienced increase of crime rates as criminals use the empty homes as their base camps. With more and more homes abandoned due to foreclosure public safety has degraded.
How safe is the area?
When main industries in the area shrink, jobs disappear, homes are foreclosed and crime rates go up. When you are planning to invest in real estate during this housing crisis, looking at the area five miles around the property is more important than looking at the property alone. Your investment can turn into a tragic mistake when the property is something you look at more than the safety around it.
What is the interest rate?
Currently interest rates are low. However, we should see how this develops after the Federal Reserve stops buying mortgage backed securities at the end of March. No matter how deep you fell in love with the property you just found, take your time and see if you can get a low interest rate. If you are buying a foreclosed home with such a great price that you can afford to buy it in cash, the price for cash deals are usually much cheaper. This is even much better!
In conclusions, the majority of people may think that nobody is winning in this housing crash. However, somebody is actually making money and taking advantage of the crash… and so can you!