Real estate investors have had a heyday in the last ten years or so. Although the market has slowed down considerably and housing values have bottomed out, the smart real estate investor can still find real estate deals worthy of their investment dollars.
The Lucrative Rehab Business VS The Foreclosure Market
The housing boom was evidenced by the scores of popular infomercials and television shows that followed real estate investors as they rehabbed residential real estate for a profit. The typical show depicted an experienced investor or investment company as it purchased a run-down property that was sorely in need of a major makeover. The investor purchased the home with the sole purpose of "flipping" it, meaning, fixing it up and reselling it for a quick profit.
In the TV shows, once the purchase was complete, teams of subcontractors descend on the purchased house, swarming over it like a hive of busy bees. During the first phase, the real estate investor's construction team does the demolition of the various rooms and services. They remove all the trash left in the home by the prior residents, often renters. They remove all the outdated appliances, cabinets, plumbing fixtures, countertops, and damaged substances like moldy wallpaper, drywall or outdated tile.
After demo has been completed, the real estate investors start rebuilding the house from the ground up. New flooring goes down, new walls go up, paint and wallpaper goes on. Tile, granite or concrete countertops are installed in the kitchen, and new kitchen cabinets go in. Brand new shower surrounds, toilets, sinks, and vanities are installed in the bathrooms. New light fixtures and landscaping complete the the new look and Rehab.
The real estate investor commonly replaces the infrastructure of the home, installing a new furnace or air conditioning unit, and replacing the roof, often with a new style to it. Sometimes these are unplanned repairs, which are discovered during the rehab process but commonly these are seen in the original vision for the home. The unplanned repairs wreak havoc with the real estate investor's budget, but in this seller's market of the near past, the investor always makes a handsome profit.
Now we are in the foreclosure market, the bubble has burst. Foreclosures are abundant and you may find one right down your street. What does the future for real estate investing entail? Are there still prime deals out there?
The Future of Real Estate Flipping
With the current sub-prime mortgage crisis, homeowners are abandoning perfectly good homes because they can no longer afford their house payments. Foreclosures abound. Banks consider themselves lucky if they can resell these repossessed homes for the amount owed on them. Most are not run down enough to support a rehab, makeover and flipping effort, and real estate investors are scratching their heads, wondering how to make a profit in this downside market.
The answer for the banks seems to be to hang on to these investments and wait. But real estate is one investment that withstands the test of time and it can be an investment haven for shrewd real estate investors. Although the market is in a strong downward cycle at the moment, housing values are certain to turn around and go back up. Investors know this and are counting on it.
The Rental Housing Market
In the meantime, the rental market is strong. Housing horror stories are making a new generation of would-be homeowners reluctant to buy homes until they are certain they can afford them. Real estate investors who become landlords can have their own mortgage payments made by their renters and hold on to the property for several years, or longer, weathering the current crisis out and until they can make a profit once again.
One thing you can do is read up on how to invest and gain financing in real estate in this tough market. A great ebook for this is Real Estate Shared Appreciation Mortgage Book