advertisement
Article Tools
Find a new home or apartment
Because of a poor resale market and insufficient rental rates, investors in the South Florida market can expect to wait three years for their investments to generate positive cash flows, says Peter Zalewski, a real-estate agent whose Bal Harbour company, Condo Vultures, matches buyers with distressed properties. The one exception, he says, is waterfront property; demand for that remains relatively strong despite the overall slump.
Why would anyone be willing to wait so long to reap the rewards of an investment? Think of it like an after-Christmas sale, Zalewski says: "The good quality goes first." In other words, anyone attempting to cherry-pick the most desirable properties will have to get in early and pay a premium.
People buying their dream houses fall into this category, as do investors who like the potential of a particular property. Those looking to make more of a commodity investment that can be quickly flipped are better off waiting until the market approaches its bottom, when prices are lower and the opportunity to resell properties greater.
5 investment vehicles to consider
Whatever the investment timing, small investors have several options for laying down their bets:Short sales. One of these occurs when a buyer offers less than the amount owed on the property. It's up to the financially pressed property owner to persuade the lender to cash out for less than is owed. This increasingly popular practice is a way for sellers and banks to avoid the headaches of default and foreclosure.
Court-ordered foreclosure auctions. Deals can be had at auction, but not always the best deals. Minimum-reserve bids often are based on inflated appraisals intended to cover attorneys fees as well as loan balances. And remember: Caveat emptor. Buyers should be prepared to do their own due diligence, including:
- Making sure that a property is free of liens and that no creditors are standing in the wings.
- Inspecting the property to the best of their ability. If you can get inside, great. If you can't, look through a window and check for water or other damage. In the absence of a full inspection, submit a bid that reflects the additional risk you're assuming.
More from MSN
Lender auctions. These are foreclosures sold without the intervention of a court and without the attendant legal fees. Still, there will be a minimum-reserve bid tied to loan value, and the caveat regarding due diligence applies as well.
Developer closeouts. Unsold units at a new project may be put on the block at what are advertised as "fire sale" prices. However, prices may be propped up by the developer's fear of being sued for undercutting the market by people already owning homes at the project.
After-auction sales of REOs. If foreclosed real estate owned by lenders (REOs) fails to move at auction, it typically is turned over to a real-estate agent for sale at the best price attainable. In other words, there's no longer a minimum reserve governing bids, and buyers are free to cut the best deal they can.
- Video: 2008's real-estate outlook
Investors not comfortable going it alone have two other options: They can find like-minded investors and pool their resources and knowledge, or they can find a professional adviser.
To put together an investment group, McCabe advises, check meeting announcements in a local newspaper to learn when area real-estate-investment clubs are meeting or when investment seminars are being held. These are good venues in which to meet other investors.
For more formal guidance, McCabe suggests, enlist the services of a real-estate agent who specializes in distressed properties. Referrals from other investors probably are the best route to finding the right adviser. Further, an adviser should have professional accreditation, a reputation for honesty and a track record of making money in both up and down markets.
However one chooses to get in the game, McCabe says: "Cash is king, and excellent credit is also king. If you've got those going for you, a lot of the competition will be knocked out."
< previous | 1 | 2 |
Rate this Article
High