Thanks Hendo101 for this image of Northern California’s Point Arena Lighthouse
I just read an article posted on MSN about investing in real estate. It was entitled Real Estate Investors’ 10 Big Mistakes. Although the title sounds like another bubble bursting article, it was not. The article spoke about the philosophy of investing in real estate and how individual investors should act when making real estate investments. It made me think, have we begun to turn the corner on the current down real estate cycle?
I believe one of the signs that we have begun to cycle back towards a more robust market will be when buyers realize that there are good deals in the market. As I have posted in just the last couple of weeks, I have experienced many of qualified home buyers are getting good deals. I am seeing that qualified buyers are able to leverage their financial strength and are getting good value for their financial power in this market. This is very different from past markets were anyone who could fog a mirror could get enough financing to write a winning offer and also to financially hang themselves.
Don’t get me wrong, we still have mechanical problems that will continue to be a drag on the real estate markets. The liquidity crisis has drastically consolidated the number of lenders offering loans. This consolidation has a profound effect on controlling the supply, pricing and diversity of loan products available. This limits the number of buyers that are able to get financing. Yet, I have begun to hear lenders say this consolidation has gone too far and that it is cutting too many qualified buyers out of the market that would have access in a normalized market.
This week the Federal Reserve acted to cut the prime interest rate by 50 basis points (1/2%). This is evidence that not just the lending community is thinking things have gone too far. Even if the rate cuts will not directly effect the housing markets fundamentals, it is a signal to the markets that change has begun. The bulls rallied on Wall Street and the Dow Jones Industrial Average adjusted positively on the rate cut news by over 330 points.
So, what does this mean for buyers and sellers? It means they need excellent professional help to advise them in this ever changing market. For sellers the days are gone where a sign in your front yard brought 10 offers and more money than you ever thought possible. For buyers, the reality of getting good financial, mortgage, insurance, and real estate advice is more important than ever. Below is an excerpt from the article that inspired me to write this post. Bankrate spoke with established, full-time real-estate investors and with professionals, such as bankers, to identify the 10 types of traps into which real-estate investors most often fall. Item #3 on the list illustrates that successful real estate investors understand they need good help to make highly effective decisions. Might I add we offer all of our residential and investor clients a team of highly valued professionals that meet all the criteria below.
3. Playing Lone Ranger
A key to success is building the right team of professionals. At the very least, you need good relationships with at least one real-estate agent, an appraiser, a home inspector, a closing attorney (we do not use closing attorney’s in California) and a lender, both for your own deals and to assist with financing for prospective buyers.
In the remodeling and maintenance segment of the business, the team includes a plumber, an electrician, a roofer, a painter, a heating and air-conditioning contractor, a flooring installer, a lawn maintenance service, a cleaning service and an all-around handyman.
You can’t build a business as an investor if you’re spending all your time fixing leaky faucets and putting up ceiling fans.
