Recession Survival

How To Profit From An Economic Recession!

Real Estate

Page 3

Other factors you may want to take into consideration before closing the deal are:

1  The quality of the neighborhood. Unfortunately, all urban areas have their slums. An area with a high crime rate, a wide-spread amount of graffiti and property damage, regular drug activity and daily visits from the police is going to be much less desirable to a prospective buyer than a home situation in a nicer part of town, where they can safely allow their children to step out the front door without having to worry that they won’t come home.

2  The condition of the house. There have been many, many investors that have plunged right in to the world of real estate and rehabilitation and bought a handyman’s special only to discover that by the time they got done paying for the repairs to the property the profit margin was considerably less than what they were hoping for-and what they would have made investing in a property that needed a little less work.

3  What you plan to do with it afterwards. This is probably the biggest factor when it comes to real estate investing, because what you plan to do with the property after you purchase it makes all the difference when you’re determining what types of properties are suitable and what are not. If you’re planning on rehabilitating a property, then reselling it as a single family residence, purchasing a small ranch house on the edge of the city may be a perfectly profitable proposition. You’ll likely be able to sell the property for more than you paid for it and justify the investment.

On the other hand, if you’re planning on renting the property out you’re going to want to investigate the current rental rates of the neighborhood before you’ll be able to determine the success of the investment with any degree of accuracy. There are some areas where income based housing drives the average rental price of the neighborhood down, which is good news for renters but could result in major inconvenience for the investor who has paid hundreds of thousands of dollars for a property that they are only going to be able to rent for a couple hundred dollars a month.

The moral of our story? Take the time to carefully consider your options and do your homework before closing the deal, no matter how appealing that deal may be.

Of course, if you’ve been investing in real estate for the past ten years none of this is news to you! Experienced investors who are familiar with things like market trends and identifying weaknesses in potential properties will find the buffet of low priced real estate spread out before them a tempting proposition, and reaching beyond their immediate demographic boundaries may offer a new wealth of possibilities for tremendous profit gain.

Just remember that investing during a recession is a slightly different proposition than investing when the economy is booming. You’re going to hear me say this over and over again, because it can’t be emphasized enough-when you’re investing in real estate during a recession you’re investing in the long term. Many of today’s real estate investors have made their fortune in the market by taking advantage of today’s “Now, now, now!” mindset and investing in and disposing of real estate in a very brief amount of time. When the economy is strong it’s not at all unusual for an experienced investor to be able to purchase and flip a property within the space of a week-experienced rehabbers in a month of less. Any property that you invest in during a recession may remain in your possession for several months before you are able to realize a maximum return, because the whole point of investing during a recession is to purchase an asset at the lowest price possible and sell it when the economy goes back up.

It’s rare for the experienced investor to find themselves in this situation, but it’s entirely possible to spread yourself too thin when the temptation of pages upon pages of available property was just too much to resist. Suddenly they’re responsible not only for the amount they’ve paid for the initial investment to purchase the property in the first place, but for the taxes, rehabilitation and maintenance required to keep it maintained and prepare it for sale.

Try to limit yourself with a realistic expectation of what you can afford in the long term. If as the recession continues you find you have more than enough capital in hand to pick up a couple more properties you always have that option, but disposing of a property you can no longer afford during a recession can be more difficult than taking a submarine and going diving for Atlantis-which is the reason that investing in real estate during a recession is so lucrative to begin with.

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