Buy Low, Sell High
For That to Happen, Somebody’s Got to Lose Money.
At times I am amazed when I analyze the simplicity of real estate investing. We often refer to it as “REI” and in my real estate investment mentoring program I constantly try to keep it as simple as possible. From the real estate investment expert to the sincere student of real estate investing for beginners, all must recognize the “see-saw” of equities that takes place in each transaction.
With the dust settling from the events of the last 2 years, it is evident that the average homeowner cannot afford to withstand the huge debt-to-value ratio that so many are faced with. Still today, there are fully 1 in 4 families that are “upside-down” on their mortgage debt due to the dramatic shortfall in home values. Everybody needs a place to live and not all houses will end up investment properties to rent. Many families see the advantages of homeownership and have opted to do what they can to retain their status as home owners.
Foreclosure is still a very bad word and worth avoiding if possible. Nevertheless, is it really prudent to keep the debt by just massaging the monthly payments a little? Many Americans have seen the folly in that and have chosen to let their lenders carry the burden of the imbalanced debt against their homes.
The preferred option in this case is the short sale. Short sales are becoming very popular since both the owner and lender can cooperate together to avoid foreclosures. The banks are benefitted greatly since they are not faced with vacant REOs that often get vandalized in the process. They usually get much more cooperation from owners and tenants when a short sale is being executed.
Many real estate investors who buy foreclosures are now turning their attention to short sales as the number of foreclosures drops and short sales become more plentiful. As I teach in my mentorship program, there is a clear psychology to each deal and when both lender and owner cooperate towards the same goal, good faith is generated and fewer losses are sustained.
So, yes. Somebody’s going to lose money along the way. However, the lender is more likely to come out of the crisis intact than the “average Joe” who must walk from their home due to the financial woes of this recession. As a result, some REI professional will be able to buy low what sold so much higher a short time ago.