The dust has not yet settled on the near total implosion of our economy in general and the real estate market in particular, yet there are indications that some investors, perhaps those from foreign countries where the exchange rate is favorable, or those that saw the fiscal Armageddon on the horizon and liquidated their holdings, have decided that, yes, this is the true bottom and they are starting to step back into the market place.
So let’s take a look at some options a small investor has available. It can either be a boon or a bane depending upon the way you approach the opportunity. The buyers, sellers and investors are the deal makers and like a chess game, they strategically change their methodologies as no one is looking to overpay or lose on an investment. There are options for real estate investing including just purchasing a REIT from a stock broker or online with a discount broker. It is possible to purchase the physical properties themselves or purchase a note from an investor that wants the liquidity to take advantage of another opportunity.
Even the physical properties you can invest in vary in many ways. It can be anything from an undeveloped parcel to a multi-family income property. Some are interested in distressed properties. Depending on the area of the country and the zoning of the localities, these properties are snatched up by developers and general contractors. The individual doesn’t stand much of a chance. I sat in the Morris County, NJ court and watched a foreclosure auction where the bank asked $39,000 and the winning bid was $390,000! There were several contractors bidding against each other (this was back in 2003) and it was obvious that they planned to greatly expand the home and resell it within a couple of months. Here in Florida, there are many limitations as to how a home can be expanded so that option has its drawbacks.
However there are situations where a foreclosure can be a good investment depending on the purchase price, cost of improvements, cost of capital, and the length of time it has to be carried before being sold or rented. So knowledge of the resale value or the current rental market is crucial. There is another way that properties become available and that is through the probate process. Not that many properties make it through the probate process because they usually have a lot of equity in them and the heirs of the deceased will inevitably exercise their right to the property. However some do become available but they are hard to locate because the last will and testaments are filed through the probate court and their records are not publicized in the same way that foreclosures are.