OfflineIt is important for real estate investors to approach their real estate activities as a business in order to establish and achieve short- and long-term goals. A business plan allows real estate investors to not only identify objectives, but also determine a viable course of action towards their attainment. A business plan also allows investors to visualize the big picture, which helps maintain focus on the goals rather than on any minor setback. Real estate investing can be complicated and demanding, and a solid plan can keep investors organized and on task.
•Know Their Markets
Effective real estate investors acquire an in-depth knowledge of their selected market(s). The more an investor understands a particular market, the more qualified he or she will be to make sound business decisions. Keeping abreast of current trends, including any changes in consumer spending habits, mortgage rates and the unemployment rate, to name a few, enables savvy real estate investors to acknowledge current conditions, and plan for the future. Being familiar with specific markets allows investors to predict when trends are going to change, creating potentially beneficial opportunities for the prepared investor.
•Maintain High Ethical Standards
Realtors are bound to act according to a code of ethics and standards of practice policy, and real estate agents are held to each state's real estate commission rules and standards. Real estate investors, however, unless they are associated with membership-based organizations, are not usually required to maintain a particular degree of ethics in their business practices, as long as they operate within the boundaries of the law. Even though it would be easy to take advantage of this situation, most successful real estate investors, and especially those who remain in the business for the long haul, maintain high ethical standards. Since real estate investing involves actively working with people, an investor's reputation is likely to be far reaching. In the case of an investor lacking in ethics, the consequences can be damaging. Effective real estate investors know it is better to conduct fair business, rather than seeing what they can get away with.By Jean Folger
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Foreclosures are peaking in 2010. New home construction is at record lows. Fed intervention in the mortgage-backed securities market is over. The home-buyer tax credit expires in a few weeks. Interest rates and inventories are set to rise. Housing normally leads us out of a recession but it won’t lead us out of this one. Jobs will and that doesn't seem to be happening anytime soon. The real estate market looks like it will limp along until sometime in 2014 or 2015. Welcome to the new economic normal.
How will you as a real estate investor to prosper during this new normal?
This new economic normal is scaring many of you reading this into not doing anything. And if you don’t do anything we already know how your story will end. Having a working knowledge of what’s going on in the marketplace is the first step to replacing your fear with understanding. In doing so, you need to reevaluate your real estate investing strategy and make adjustments where necessary. Before you do, consider these key points that will undoubtedly affect your strategy over the remainder of 2010:
Interest Rates
If you read this blog often, you already know the Fed’s purchasing of mortgage-backed securities just expired. And rates increased. Interest rates increased to the highest point since Freddie Mac’s interest rate survey since January 7th, of this year. Expect this trend to continue.
Takeaway: Super cheap money will be replaced by cheap money over the next 12 months. Adjust your cost of money if you are plan on buying and holding.
Peaking Foreclosures
An expected 1.4million foreclosures will hit the market in 2010. This will be the peak year of foreclosures in the US. Despite this peak, homes foreclosing will continue to stay high for roughly another 3 years while delinquent loans cycle through the process and homeowners who can no longer hold on let go of their homes.
Takeaway: If you’ve focused on wholesaling, consider opening additional doors with a real estate license (I believe having a license, especially if you’re wholesaling, transacting, trading, etc, is a no-brainer). I did this when I entered real estate investing and it propelled my personal cash flow as I buyer-represented many investors looking for bank REOs. Consider being a listing agent as well.
Rising Inventories
Inventories are set to rise due to ballooning 90-day+ delinquencies causing further declines in real estate prices in the next 3 quarters. Certain areas have seen reductions in inventories because of a lack of new home construction, but overall the consensus calls for inventories to rise nationwide. If your focus is appreciation, we likely haven’t hit the very bottom yet. See Peter Gardini’s recent supply and demand blog. rhenricher