A Bad Market Can Still Yield Safe Deals…with Right Strategy

Posted by Jim DeBellis on June 3rd, 2011

Sometimes you just have to get away from the fray and raucous noise of the of the media freak show surrounding the housing market and take a cool, rational look at things from a whole different perspective. After all, housing is an important part of everyone’s lives – but every dismal report and scary news story doesn’t necessarily affect you personally. So…is this a good time to get into the housing market? The answer really depends more on you than it does on the market.

If you need a new home, then this is the right time to look at your options. If the financial crisis hasn’t hit your own bank account and monthly budget too severely, then this is a great time to shop for houses. As long as you can afford the monthly payment, have a few months’ reserves in case of unexpected repairs or financial surprises, and do your homework to drive the best deal you can – and as long as you plan to stay for five to ten years to ride out the declining market and to cover the costs of buying and selling – then go for it. Houses are cheaper now than they were a few years ago, so if you could afford a home then and your situation has not changed, then you can afford one now. You’re not buying a bad market; you’re buying a great house that you can afford.

If you’re an investor, then there are more things to consider. Although the national homescape is quite bleak, certain cities and neighborhoods are getting along quite well. Still, the general market trend for home prices is downward, and there are still tens of thousands of foreclosures dragging prices even lower. It is not a great time for flipping – buying, fixing (usually) and then selling as soon as possible. With prices falling every month and a good chance that you will have to hold and service that property for many months before it is sold, that can be a risky game.

But the rental market is gaining strength as homeownership decreases, and rents are rising again. So a flipping strategy of buy, lease, and sell makes a lot of sense. Check the rental prices in your target area and find a location with high rents, high occupancy, and high demand. Get some well-screened tenants in the property at a rate that will make a profit for your buyer, and then the rent will drive and determine the value of the property – plus, you won’t get stuck with all the expenses of owning an empty home. Don’t try to sell a vacant house; sell a thriving business.