Hey Folks,

As promised, I am writing today to talk about the current over all U.S. Housing market, and where creative real estate fits within that.

Some folks are now claiming that buying real estate right now is a mistake. I could not disagree more. For me, it’s always a good time to buy. The key of course is to buy RIGHT, meaning, BUY FOR WELL BELOW TODAYS VALUE!

Sounds simple right?
and yet, some seem to still get confused or ignore this concept.

The question I hear most often from newer investors, or those frozen in market fear is; “what IF the value goes down”?

Sure, this could happen and in many cases, very well might. However, remember, I said, you want to buy for BELOW todays value, considerably less in fact.

Imagine, you buy a single family house for $50,000 today, that has a value of $100,000 and rents for $950/month. What happens if the value of this unit goes down 20% more, and the market rent drops 20%. Your profit monthly will be less, and you will have less cashflow……..BUT, you will have value. A performing asset.

This market type (buyers market, with declining values), as well as any other type of market, (sellers, where appreciation is going up steady, or at even excessive rates as in previous years), are always the time to focus on cash flow. Cash flow is what builds wealth and freedom.

No matter what method you use to acquire investment real estate, cash, credit, combination of the two, or some creative method with no money down, or terms, the central focus needs to be to make the transaction support itself. I live in Florida, the land of the Gators, and around here, there are signs all over the place that say, “don’t feed the alligators”. This is very true, and a total waste of time. You cannot tame a gator. In real estate investing, we also have gators……..these are the transactions that cost you time, money, sometimes credit, and always aggravation……..all without profit, and most times, loss.

What I try to pass along to those who learn from me, is that creative terms, do not always mean a deal is in the works.

Let me give you an example. Someone local I am working with, just recently began marketing to find sellers in need. He’d been trying to invest for some time, and frankly, just needed a little boot in the rear and some guidance. As with anyone new, he still needs some guidance. (I did too back in a day, and will admit to seeking help here and there to this day). Anyway, this investor calls me all excited last week with what he described as his “first creative real estate deal”. He had a seller call who just wanted out, and was open to allowing him to buy for loan balance, and even take over payments.
The thing is, the seller owns a property where he owes more than the house is worth.
If anything, the sellers house is a good candidate for a short sale.
Had the investor gone ahead and purchased the subject property as he was wanting to, he’s have been ‘feeding a gator’.

Not something I encourage anyone to do, and TRY my darnest to make sure they don’t.

Unfortunately, the new investor, when talking to the seller, made it seem as though buying for what he owed was possible. This planted the idea firmly in the sellers head that he could sell, conventionally, and solve his problem.

So, when advised that taking the property as it sits, reinstating the mortgage and keeping it alive was not a deal, the new investor had lost the lead.

The new investors mistake, was to think that getting into a house creatively, with no money down, and no credit check equalled a deal. He missed the part in my teaching (actually chose to ignore it), where I STRESS to buy right.

So, while he’s not back to square one, he is rethinking his approach and attending some seller meetings with me this week to learn.

Now there might be some reading this who say, “But Jim, my marketing brings in calls from motivated sellers all the time who owe more than their house is worth, there are no deals in my area.”

You know what? They are wrong, and right at the same time. I’ll admit, last week alone, we had 34 calls from sellers, and in that batch, ONE was a deal worth going after. The others, either would have worked for a short sale, if the lenders agreed of course, or, were simply stuck losing their houses to foreclosure.
Most because the sellers simply do not realize that yes, a house they paid $250k for 2 years ago, is most likely worth $175k, perhaps less, in the current market.

There are ways to make money in this market, and using some of the tried and true creative investing methods will make investors wealthy, IF, they approach every investment correctly.

In the next installment, I’ll show you which methods of creative real estate investing I am using now, in this market, to make money and continue to create cashflow.

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Happy investing, and keep the rubber side down,
Jim
The Biker Who Buys Houses