| A good friend of mine is getting his house | | | | mortgage payments than rent payments. |
| foreclosed on. Robert is a real good guy. A | | | | Conversely, when interest rate goes up rental for |
| Christian. A family man. He is in his early forties. | | | | apartment and single family homes is also up |
| However, he bought his house in the height of the | | | | simple because it's cheaper to rent than to make |
| real estate market. He paid top dollar for his | | | | mortgage payments. My friend Robert whom I |
| brand new five thousand square footage house. | | | | talked about at the beginning of this article would |
| He got a fixed three year ARM (Adjustable Rate | | | | certainly rent a house. |
| Mortgage) at only 3.75%. Now, he just lost his | | | | This is a good indicator for real estate investors |
| job, he has been late in couple of accounts, and it | | | | to know that we're getting in a buyer's market. |
| is time to refinance this ARM. | | | | When the rental vacancy rates indicator is going |
| Robert is faced with another problem: the market. | | | | down you should start selling. |
| The real estate market is not what it was back | | | | Put it another way: when interest rate is going up |
| then. For instance, Andre Agassi and Stephi Graff | | | | start looking also at the rental vacancy rate. If |
| just sold their Californian house three million dollars | | | | you're in the single family home market look only |
| less than what they've paid for it just five years | | | | at single family home rental indicator. Not the |
| ago. It is true that as real estate investors we | | | | condo rental vacancy rate indicator. Compare |
| can profit from a rising and falling market. But | | | | apples to apples. |
| first you must know your market so you can | | | | Default Loans |
| plan your investing strategy to fit that market. | | | | This is a clear indicator that foreclosure is looming. |
| So what is "The Market"? | | | | Bear in mind that part of the foreclosure is the |
| Real estate market is not like the stock market. | | | | result of bad lending practices. Take the sub prime |
| We don't say, we're in a bear market or a bull | | | | market for instance. Lending 100% of the loan to |
| market. There are facts and figures that the | | | | an OK buyer is definitely taking some risk. The |
| media reports on the housing market on a regular | | | | market will correct itself. |
| basis, most of which are really confusing to the | | | | When defaulted loans are high you can use two |
| average real estate investor. Let's discuss each of | | | | different strategies. |
| those indicators and see how they affect the | | | | 1. Buying the property itself |
| market. We also will talk about how to adjust | | | | 2. Buying the defaulted loan at a deep discount |
| your investment strategies. | | | | (this is also called short sale the note). Then if you |
| New Home Sales | | | | want to own the property you have to go |
| Sales of new homes is a indicator used by many | | | | through the foreclosure process. |
| economists to measure the strength or | | | | In both cases you end up owning the property at |
| weakness of the housing market. This data is | | | | a fraction of its value. |
| found by checking the permits submitted for new | | | | If you're in a high interest rate market you should |
| home constructions. This data is relevant because | | | | expect the rental indicator going up. You can rent |
| it can show how strong is the demand for new | | | | the property and wait for the market to correct |
| homes. In metro Atlanta for instance, the sale of | | | | itself then sell the property at huge profit. |
| new homes in lower in the inner city than in | | | | I've seen many investors playing the buy and hold |
| Gwinnett county where I live. The reason is that, | | | | game too long. Everything is for buy and for sell. |
| in Gwinnett, land is plentiful. This may result in | | | | You should get too emotional about it. Buy low, |
| oversupply. Conversely, the supply in inner city for | | | | sell high. Buy low, hold for a while, sell high. Buy |
| new constructions may be lower than the | | | | low, sell low quickly. Control high, sell high. |
| demand. So, you should micro analyze the data a | | | | This last strategy works well when the default |
| little closer before drawing any definite conclusion. | | | | rate is high. For a few thousand dollars you can |
| In case of inner city where there is shortage of | | | | control a good piece of property (by getting the |
| new homes, the Home Re-sales data will be a | | | | deed or having an option on the property) and |
| more accurate indicator of the market. It shows | | | | turn around and sell the property to someone |
| how many properties have been sold. | | | | else with a better term than the rental market. |
| Rental Vacancy Rates | | | | My hope for you is to look at the real estate |
| When interest rates are low, home buying goes | | | | indicator and apply some buying and selling |
| up simply because it is cheaper to make | | | | strategies. |