By Bill Young
A "bad market" in this instance means a real estate market where there is little to no appreciation, the market is clogged with unsold houses, depressing sales and foreclosures are up; torpedoing home values.
So clearly, the traditional, "buy, fix up and flip" or buy and sell to a rehabber is not going to work in this environment. In fact, it is those very flippers who were late to the party or just plain greedy and are now bailing out and dumping their properties, that are helping to drive down home sales and prices.
So what is a real estate investor to do to make some quick money, especially if he or she is new or has no resources, which describes many flippers?
The solution to this dilemma lies in understanding the needs of property owners who have to sell in the reality of today's market.
People looking to sell in this environment are going to have problems; huge problems if they are forced to sell at this time.
The houses will sit on the market for months with no offers or very low offers. The homes value will slowly erode as the homeowner waits for Godot.
In fact, many people are or will be trapped in their homes; perhaps unable to afford to stay, unable to sell; especially if they have little or no equity in their homes.
In order to get out of their homes, they would have to bring cash to the closing and "buy" their way out of the house. This is impractical for most people, especially if their need to sell is financial as many are.
Rising mortgage payments, the result of financially incongruous mortgages, so prevalent during the recently departed "Boom;" called for "Resets" a few years after origination at 50-100% increases in payments.
Now, many of these families are unable to afford to keep their homes.
Job losses, divorce, illness and death are the other primary motivators that force people to sell their homes as soon as possible, regardless of market conditions.
Most people who have bought their homes or refinanced to "consolidate their debts" in recent years have very little equity in their homes. This means they can't lower their prices to meet the soft market or they will need to bring money to the closing to make up the deficit between their selling price and the fees and expenses of the sale.
These people need help, desperately.
If they cannot get out from under their homes, they face the ruination of their finances for decades to come. Contrary to popular belief, they cannot just "send the keys to the bank" and walk away, free of their troubled property.
If the bank forecloses and sells the property for less than they were owed, the homeowner would be liable for the difference and/or be subject to income tax on the deficient amount! Don't ask. It's just IRS rules.
The only way for these unfortunate homeowners to get out of the frying pan, is to get into the fire! If the homeowner filed bankruptcy, it would protect him from the deficiency judgment and the income taxes due on it.
Herein lies the opportunity to make fast money!
Find these people who are trapped in their homes and help them get out of their nightmare. Refer them to experienced real estate investors who can help them get rid of their property.
The investor will either pay you a small fee for the lead, or pay you a larger fee, say a percentage of the profits, when he or she disposes of the property.
The key is to be flexible. The real estate market changes and you must change tactics if you are to make money in the new environment.
Don't be like the rat who repeatedly went back to the box his cheese used to be stored in, even though it was no longer there.
Duck hunting season is over, Bunky; so go look for some turkeys!
Copyright 2006 Bill Young. Bill is a Financial Personal Trainer. He trains groups and individuals on how to Quit the Rat Race and find financial independence in a few short years. He has 20+ years experience as a real estate investor and personal financial consultant. He offers a free, 1 year course in real estate investing, MotivatedSellersOnline.com as well as free weekly lessons on how to solve your money problems: HowtoSolveYourMoneyProblems.Com.
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