Making Money in a Down Real Estate Market

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