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Record low interest rates, combined with deeply discounted home prices, have bottom fishers swimming frantically, in search of the perfect deal on the perfect home.  But, before you strike, beware.  Read our 5 Tips to Avoid Getting Hooked in a bad way.

1. 1.  Think Long Term:  This is a market for smart bottom fishers, not flippers.  In this market, our advice is that you should plan to buy a home to live in, then hold it for 3-5 years, at the minimum.  Our reasoning, first, prices have not fully stabilized at these levels.  Secondly, there is no indication that prices will rise any time soon.  Last of all, we are still facing a rise in foreclosures in 2010, which will keep downward pressure on the market. 
2. It’s All About the Local Market:  We have all heard the golden rule of successful real estate investing…Location, Location, Location.  In other words, if you have a choice between a bigger home in an ‘iffy’ area, or a smaller home in a better one, always pick the the Good Location.  Remember, when comparing locations, real estate markets are entirely a Local matter.  There are big differences within neighborhoods, zipcodes, school systems and suburban towns.  Focus on the hottest area’s and the ones that are conveniently located near major employment centers.  In rough sea’s, these area’s will always rebound the fastest and appreciate the most. 
3. Be Wary of Foreclosures:  While some foreclosures may be a great buy, many of these properties are “cheap” for good reasons.  Many of the homes weren’t great to begin with and most have been terribly neglected.   Carefully look for mold, water penetration, structural problems, missing appliances, soiled carpets and flooring underlayments, broken windows and glass, strange odors and any evidence of illegal drug trade.  Also, never get emotionally attached to a foreclosure home.  Banks are notoriously hard to deal with and they can take forever to respond to offers.  Some buyer’s report a wait of several months before the bank approved an offer, or not.
4. Get Pre-Qualified for a Loan:  Submit your letter of loan approval with any offer you make on a home.  Banks always require a letter of pre-qualification before considering a bid, as will any serious seller.  With proof of funds in hand, you will be taken much more seriously by all seller’s, and you will in the end, get a much better deal on the house.   Getting Pre-Approved for financing is no lose proposition.
5. Don’t Take Chances.  Buyer’s are in the drivers seat and a lot of great values are available, but please don’t overspend.  The job market and general ecomony are uncertain.  Make sure you can afford the property, even if you find yourself in a bad or unexpected situation.  Even the perfect property can turn into a nightmare, if you can’t reasonably afford it. 

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The new, US economy brings with it, a whole new set of rules for investing in real estate.   In the past, real estate has been a tried and proven method for quickly building wealth, but the current rules for successful investing have changed.

Making money in real estate is still a possibility, but investor’s must pay very close attention to the changes that this ecomonic cycle brings.  Today’s investors need to reexamine their criteria for buying, selling or holding property.  They also need a lot of patience and flexibility, along with complete and detailed research, before they jump in and take advantage of some of the best bargains seen in years.

NEW RULES FOR INVESTING IN TODAY’S REAL ESTATE MARKET

NEW RULE #1:  LOCATION, LOCATION, LOCATION.   For the baby boom generation, the suburbs were “the” location for profit and life style.  Fuel was cheap, commutes were short and the ‘burbs’ offered the big house, with picket fenced yards and the image of the Leave It to Beaver lifestyle.   Not so much, today.  Today, it is the urban scene that is making a comeback.   While homes in downtown area’s are generally more expensive on a price per square foot basis, buyer’s today are willing to pay a bit more money for less square footage.   Urban center living eliminates long commutes, urban sprawl, expensive fuel bills and provides nearby ammenities without the need to drive.

NEW RULE #2:  STAY PUT AND DO NOT REMODEL WHEN THE MARKET IS SLOW.   In the past, many homeowners gained equity by renovating their old home while the market was slow.   The improvements added value to their real estate, while they waited for more favorable market conditions.  In the 2008 housing market, any major renovations should be analyzed purely from a return on investment perspective.   According to Remodeling Magazine, which just published its Cost vs Value Report, homeowners should be warned that they will not recover as much of their costs for remodeling as they did in the past.   The best investment today’s homeowner can make in terms of renovating fall in the category of paint, landscape and green, energy saving features. 

NEW RULE #3:  Technology and Networking are the Key to Locating Great Properties.   Home listings, valuations and other crucial information for real estate investment used to be available only through a real estate agent.  Now, the genie is out of the bottle and the best sources for real estate information can be accessed with nothing more than the click of a mouse.   More technology has also made it possible for home seller’s to list their property on the powerful, national MLS, without listing with a agent.  Companies like Why 6 Percent.com, and its national network of broker’s, list property for seller’s, investors and builders who want the exposure the MLS provides, but do not want to pay 6 percent of their sales price for the priviledge.   Technology has changed the way buyer’s and seller’s connect, and the way that property is advertised.   Smart investor’s should take advantage of this new alternative, as it offer’s accuracy, speed and control unmatched by the traditional route of buying and selling through agent’s only.

New Rule #4:  BIGGER IS NOT ALWAYS BETTER.  In the past, agent’s and home builder’s advised buyer’s to purchase as large of a home as they could possibly afford.  As a result, home size in the 1970’s averaged about 1700 square feet, with 3.1 people in the average family.  In 2004, the average size of a home was around 2400 square feet with only 2.6 occupants on average.   Today’s lending and energy crisis has changed our thinking and bigger is not necessarily the best investment.  Buyer’s are looking for a home that meets their needs without paying for space they don’t need.   Today’s investor needs to adapt their thinking and focus on useable living space, energy saving ammenities, security and conveniences instead of targeting the over blown McMansion.  Another demographic also backs up the theory that smaller may be better.  For the next two decades, retiring baby boomers will be scaling out of their McMansions, now that their families have left the nest.  The boomer’s will favor smaller homes with more ammenities, located in convenient neighborhoods that are clean and safe.

New Rule #5:  FLIPPING IS OUT. BUY AND HOLD IS IN.   Today’s falling prices and the huge inventory of unsold property means that potential bargains are plentiful.  Smart Investor’s will take advantage of the current market and lock themselves into a good deal now, and hold the property until stability returns.  Prospective investors should be warned that the crash we are experiencing will not turn around anytime soon.  Prices will continue to fall, though not as dramatically as we have seen in the recent past.  As prices firm and inventory is sold, the patient investor will see gains, but they should plan on waiting five years to ring the register.

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