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Article of the Month for December 2008 Printer friendly version

Turning Gloom into a Boom

by Ward Hanigan
(Article written for The Norris Group December 2008 newsletter)

To generate profit in a declining market in the midst of a prolonged, national recession, requires a high degree of self-discipline and focus. This is the challenge for 2009, and it demands a lot of flexibility from investors.

Most of us are going to have to buy and resell quickly, rather than just buying to hold for an eventual turnaround. Why? Because we don’t have the deep, deep pockets necessary to buy and hold a large, static inventory of houses.

In a bear market, the property that resells faster than any other is a single family detached, entry-level house located in an urban core rather than out in the boonies. The entry-level segment has the greatest number of qualified buyers, properties, and financing assistance programs. And financing home resales is getting better and better right now. In an effort to help buyers to qualify easier, interest rates are being pushed down to 4.5% giving them a greater motive to buy now.

Where do you find these deals? The most deeply discounted properties are found at your public, county foreclosure auctions. In this market, the mindless overbidding that was rampant a few years ago has all but disappeared. Now there are just a few perennial pros and they aren’t pressed to overbid because of the lack of competition and the gusher of great deals going to sale on a daily basis.

The lack of competition is primarily due to this: You need knowledge and expertise to analyze a foreclosure buy and amass the gobs of money that “all cash” bids require. Once you have solved these two riddles you’ll wish it was a lot tougher…to keep any new competition at bay.

Visit your local real estate investment club and ask around for the names of a few genuine mentors who have the expertise you need to master.

You will want to resell your properties for the most you can in the shortest time possible. In a buyers market, we redouble our efforts to make our properties outshine our neighborhood competition. We use time-tested techniques, like Variable Range Marketing (VRM) and carry-back financing to close a deal quickly. We also make full use of any and all “first time buyer” assistance programs available in our locale, both city and county.

And if you’re located in San Diego, you’d be nuts not to add solar electric as an incredible amenity to your entry-level resale houses. No other upgrade will give your property more oomph to make it sell very quickly. What makes it doable is that the upfront cost of the solar electric installation is going to be financed by the city! It will be paid off by the homeowner over a 20-year term, and will carry over from owner to owner until it’s paid in full. Read about this great incentive here: www.signonsandiego.com/uniontrib/20081205/news_1n5solar.html

If you want to familiarize yourself regarding the state code section pertaining to this solar initiative, and how it works, go here:
http://info.sen.ca.gov/pub/07-08/bill/asm/ab_0801- 0850/ab_811_bill_20080721_chaptered.pdf

I’m convinced that we have, at minimum, a good 2-year opportunity to profitably recycle entry-level foreclosures and stabilize and improve our communities in the process.

Information provided by this website is for informational purposes only and is not a substitute for professional advice. Please consult your investment advisor and/or attorney before entering into any transaction. Read our privacy policy.

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