Real Estate Will Get Worse
I used to flip foreclosure properties leading up to the height of the RE bubble. It was tough work finding these properties, marketing to them, and then screening the potential sellers. Since I didn’t have the capital to buy the properties myself, for cash, I had to get an investor involved and made a few bucks at it. I learned a lot but realized that it was too time consuming so I stopped.
Once I found a property, I would go to my real estate investment group and search for a buyer. Right before the top in the market, the message board would be filled with 100’s of daily posts. People looking for this, selling these deals, investors with cash, flipping, etc. Then about 3 months before the peak, the post frequency started to lessen. I thought to myself, hmm this is something to watch. Little did I know that the top was about to be made and since then the RE activity in the group has been a quarter of what it was.
I know a lot of the people on that board, either I met them in person or have corresponded with them. They’re shrewd business people and they have their ears to the ground. The word on the street is that bottom is NOT in yet and their waiting to swoop in on the carnage when banks and lenders are saturated with foreclosed houses. Why bother dealing with crazy homeowners when you can just go to the bank and make a deal?
My wife and I are estimating late 2008 for a possible bottom but it remains to be seen. Probably September of next year we’ll be going to our local banks and asking for their REO lists (Real Estate Owned). These are the properties the bank owns and typically tries to unload fast. Sometimes they get Realtors to sell them for them but since no one is likely to be buying, you can go in there and negotiate rock bottom prices. When I mean rock bottom prices, I mean really rock bottom prices. Our goal is to pick up a nice little Jersey Shore house. :)
Update
It’s 2020 now and this post serves as a big reminder of what a mess Real Estate became in 2008 and how we, as real estate investors, almost blew up. The market bottomed for the most part in 2008 and then was depressed for the next 5 years or so. We never did buy that NJ Shore House but there still are post Sandy Hurricane opportunities out there if you know how to make applications to the NJ DEP. That said, Real Estate Investing (REI) is still a viable passive investing vehicle IF and ONLY IF you buy your property for cheap. You make your money when you buy!
What happened in the run up to the 2007 - 2008 crash was really crappy property was selling for high prices and we ended up buying a crappy property. Still, we made it work but it wasn’t the massive pay out we hoped. It remains a long drawn out root canal because we got greedy and got sucked into the hype. I knew a lot of people that blew out in a big way. Lucky we didn’t.
What to do today? Well the Real Estate market is hot again and I would not invested now. I would wait and go and invest in other items that aren’t as hot right now. Go where the market isn’t.