It’s that time of year again, when we sit down and reflect on the previous year and look forward to the year ahead of us. This past year has been filled with extreme swings in the economy and our emotions. For some people 2008 was a great year and for others it was a nightmare. I have been caught right in the middle of both, so I guess for me, everything evened out and it was a year that makes me look back and ask, what the heck happened. I had some winners and some losers. The losers of course came in the last quarter of the year and I did pretty well during the first 3 quarters of the year. Some might look back with discouragement and frustration. I however am looking ahead with a clear determination to make 2009 the best year ever.
With the shake up in the credit markets and the stock markets, I see huge potential for 2009 in real estate. I believe we have hit the bottom, for the most part. A new president and administration will take office on January 20, 2009 and they have made it clear that they are focused on stimulating the economy. Again, for some this will be good and for others it will be bad. For real estate investors, this will be very good. Just like when the real estate market was hot, the economy seemed unstoppable and real estate prices climbed to artificially high prices, the collapse of the credit and financial markets has artificially lowered real estate prices below the point of where they normally would have settled at.
I believe that by the middle of 2009, real estate prices in most areas will have seen the bottom. I don’t expect prices to rise anytime soon, but these low prices are creating huge cash flow potentials for rentals and lease options. The main problem I see for the average home buyer will be their credit. Because of the financial meltdown of our economy, a lot of people who started out 2008 with good to excellent credit now have bad to terrible credit. In most cases, it wasn’t even something that the average person could handle or prevent. Some credit card companies had such problems, that they actually caused problems for people who were current with their bills. I have talked to a lot of people who told me their horror stories and I personal had it happen to me. I sent in a payment on one particular credit card in Sept. 2008 for two times the minimum payment. Because of this particular credit card companies internal issues, they didn’t credit that payment till the end of October and reported a 30 day late on my credit report. After talking to several people who had the exact same thing or very similar things happen to them I believe that the credit card companies did this on purpose. The reason is simple; most credit card contracts have clauses in them that if you are late on any one of you credit obligations, then they have the right to lower your credit limits and/or increase your interest rate. This allowed the credit card companies to cap limits to what was already outstanding and even cancel credit in many cases.
Even though I could have that resolved on my credit report, that damage has already been done. In many cases this caused a snowball effect and many people’s credit will be destroyed for some time to come now. While this may sound like doom and gloom, it is a good situation for real estate investors who are persistent and know how to use this information to their advantage. Oh ya, there is another piece of the puzzle you should also be looking at. Lenders are accepting Short Sales and accepting Loan Modifications at historic levels. Many of these properties either went through foreclosure or had the original mortgage reduced and restructured to a point that can generate a positive cash flow for investors.
For investors who have either cash or usable credit, buy bank REO’s (Real Estate Owned properties from the banks). For investors who don’t have cash or credit, start looking for subject-to or lease option deals. When looking for subject-to deals and lease option deals, look for either short sale candidates or properties that have already had a mortgage modification. A lot of homeowners who successfully negotiated a mortgage modification with their lender are now in default again and the lenders will not do another modification with the same homeowner. These properties make great cash flow opportunities and can be bought either subject-to or with a lease option. And in 2009, I see this as the greatest opportunity to buy with little or no money down and with bad credit.
2009 looks to be full of opportunity and challenges, and I am going to do my best to help as many people as possible succeed this year. There will be a lot of ups and downs, but if you are willing to take this journey with me, then together we can all make 2009 the turning point of our lives.