| When the real estate market is booming, | | | | estate investing, a down market is the |
| the price of property gets higher each | | | | best time to enter. One great method |
| month. Making money in this type of | | | | for buying properties, for someone with |
| market is easy. In fact, you can hardly | | | | little working capital, is the age-old |
| avoid making money in a hot real estate | | | | gem known as renting with an option to |
| market. Just buy property at the going | | | | buy. |
| price with, preferably, a no points | | | | In a hot market, you'll never find such |
| mortgage, hang on for a couple months, | | | | a deal. It's too easy for the seller to |
| then put it back on the market and ask | | | | unload his house at a large profit. But |
| 10 percent more than you paid for it. | | | | when the house won't sell, you will find |
| If there are no offers at first, hang | | | | people who will do anything to get out |
| on, in a truly hot market, you'll get | | | | from underneath its mortgage. |
| your price in no time. | | | | Realistically, you will have to look |
| This crude form of flipping, along with | | | | around a bit to find someone who will |
| other popular forms of "Getting Rich in | | | | rent a house to you and give you an |
| Real Estate," work as long as the market | | | | option to buy, but look hard enough when |
| allows it to work. Buying fixer uppers, | | | | the market is slow, and you'll find such |
| rental properties, subdividing, even | | | | a seller, for sure. |
| just being a common homeowner are all | | | | In some people's situation, they need to |
| lucrative strategies in a booming real | | | | sell their house before they can buy a |
| estate market. In this type of market, | | | | new one. These people won't be able to |
| if you own real estate, you will make | | | | rent/option their houses. However, |
| money. | | | | there will be people who have moved to |
| What about when the price of realty is | | | | another house already and there will be |
| going down? How can we make money in | | | | people who have invested in a house |
| real estate then? Obviously, if someone | | | | whose price is falling. Many times |
| buys a home at $300,000 and sells it at | | | | these people will listen to offers that |
| $200,000 he will lose money. So, buying | | | | may lead to their disposing of this |
| and selling real estate in a down market | | | | property. |
| won't work. | | | | At first, people will tell you they will |
| In other types of commodities, we can | | | | only rent to you, but after you ask |
| short a futures contract in order to | | | | about a rent with option, many sellers |
| make money when the market prices are | | | | will change their minds. They will like |
| falling. Shorting is done by selling | | | | the feeling of knowing for sure; the |
| something you don't own and buying it | | | | property will soon be out of their hair. |
| later. This is done all the time in | | | | Even if you make offers to rent/option |
| stocks and commodities futures. When | | | | and are denied a few times, you will |
| you short something you make money when | | | | find such a deal if you keep looking. |
| the price of the shorted commodity falls | | | | These deals are made all the time in |
| and you lose money when its price | | | | slow markets. |
| increases. | | | | A great thing about a rent/option is, it |
| Unfortunately, there is no practical way | | | | is just that, an option. If you change |
| to short real estate because when you | | | | your mind, you have the option of not |
| sell real estate, a deed must exchange | | | | buying the property, and if the option |
| hands. One could argue that a | | | | is good for two or three years, by then |
| contractor could sell a house and lock | | | | the price of the house may have |
| in a high price, then build the house | | | | increased and you will have made good |
| sometime later as the price for labor | | | | money as soon as you exercise your |
| and supplies are declining because of a | | | | option to buy! |
| slowing real estate market. This, | | | | Making money in a down real estate |
| though it might have some validity, is | | | | market means knowing how to buy |
| not the same as shorting the market. | | | | properties creatively. It also means |
| In real estate we have to learn to use | | | | knowing when not to buy, namely, in a |
| the slow market cycles to accumulate | | | | hot market. Using both cycles of the |
| properties and to use the hot market | | | | real estate market means essentially, |
| cycles as a time to cash in these | | | | you will make money in a down real |
| properties by selling or refinancing | | | | estate market because you will be |
| them. | | | | accumulating property that will be worth |
| For people just starting out in real | | | | much more in a very short time. |