The Opportunities In Real Estate
By Michael Eastham, CPA CRMS

In the midst of volatile real estate and mortgage markets, it may be helpful to recognize that there exists tremendous opportunity. It seems so natural to fall prey to all the hype that is out there and stay out of the market completely. However, when I was growing up, I was taught that when life hands you lemons, figure out a way to make lemonade! So for those who are willing, let me tell you how to filter through the mess and identify opportunities.

First of all, I am not trying in any way to minimize the significance of the condition of either the current real estate or financial markets, and my heart goes out to those who are experiencing hardships. Having said that, it is typically during down markets that real opportunities can be found. Successful investors do not buy high and sell low. They do just the opposite - buy low and sell high. And in the case of real estate, many fortunes have been made by simply buying and holding, rather than selling.

One of the exciting things about the current environment is that families who were sitting on the sidelines during the “real estate boom” are now able to purchase their first home as a result of prices dropping to a more reasonable range relative to their income levels. The same thing holds true for those families who want to buy a bigger home. With mortgage rates remaining at historic lows, this becomes a real possibility.

For those who have an interest in real estate investing, there has never been a better time to get educated and begin to purchase some property for your portfolio. In fact, what I affectionately call “the two I’s of real estate” are living and active in this market: Inventories and Incentives. In fact today we have a trifecta, because Interest rates are still very low!

Another opportunity that exists is in purchasing pre-foreclosed or foreclosed properties. This can be done by locating properties that are in a financially distressed situation or by establishing a relationship with someone in the bank’s Real Estate Owned (REO) department. In these circumstances either the homeowner is not able to make the mortgage payments, or ownership of the property has already been taken back by the bank. Both of those scenarios provide amazing opportunities to identify bargains. Many times, even in a slow market like today, it is possible to purchase a house well below market and sell it quickly using either seller financing or a lease option to purchase at some time in the future.

A third opportunity that exists is for those investors who have access to cash that needs to be put to use. You may be able to negotiate with the bank to purchase of some currently defaulted mortgage notes, for pennies on the dollar. Once you own the mortgage, you can either renegotiate the terms of the note with the current owner (thus helping the owner find a payment that fits his/her budget), or if it is too far behind, you can foreclose on the property yourself and put it back on the market at a price that will attract a quick buyer.

Many of these strategies can also be implemented using your IRA creating some tax favored opportunities. Most people do not know that you can purchase real estate and mortgages for your retirement portfolio. Education is always a key to putting it all together and that is where you can benefit tremendously by putting together a team of industry experts to assist you in accomplishing your goals. That team should include professionals like a mortgage planner and real estate advisor. Of course, you can get the knowledge yourself as well, by reading a book or attending a seminar on the subject.

In any environment where adversity exists, there also exists opportunity. If you are going to be one who takes advantage of opportunity, you must take some time to get prepared so that you can benefit at the appropriate time. However, prior to the preparation, you must first choose to believe and to see that opportunity always exists!

Michael Eastham is a CPA, CRMS and is the host of the radio show “Your Home, Your Money,” which airs Saturdays at 12:00 p.m. , Saturdays at 1:00 p.m. and Mondays at 4:00 p.m. on The Clear Channel and Salem Radio Networks.