Home : It Is Often Easier to Create Wealth in Down Markets

It Is Often Easier to Create Wealth in Down Markets

Posted by Michael Sexton on 8/16/2006 at 8:24 AM

Has all the talk about a "down market" scared you away from real estate investing? If so, I'd urge you to take a look around. Many, many investors are making a fortune in the current market. If you stop hiding and start investing, you can learn to create wealth too.

Here are four strategies that can help you create wealth - and a lot of it -in today's flat market:

Down Market Strategy #1: Explore overlooked niches. This is a good time for wealth creation by investing in "fixer-uppers," of course. But it is also a positive climate for investing in small apartment houses, office buildings, undeveloped land and other niche properties. And don't overlook foreclosed properties and other niche properties that could be available right where you live.

Down Market Strategy #2: Remember to look at all the numbers. Don't get frozen by a high interest rate, slowing property sales or any other stand-alone number. Instead, analyze all the numbers that pertain to individual properties. Positive cash flow from rents, the availability of owner financing and other factors can make a property highly profitable - even one that other investors don't want.

Down Market Strategy #3: Improve what you own. If you invest an extra $10,000 to install granite counter tops in an apartment house you are renovating, you could generate an extra $100,000 in rental income over the next ten years. If you spend $5,000 on touch-up landscaping, you could add $20,000 to the selling price of a house you own. The ability to improve property makes real estate an exceptional investment, even in slow economic times.

Down Market Strategy #4: Cash in on regional trends. If you do, you can identify cities and towns that promise far above-average real estate profits today. Look for trends like these:

Improved train service between a town and a city nearby.
Job growth, spurred by the arrival of a major new employer in a state.
The discovery of a community by young urban professionals, immigrants from a particular country or members of some other group.
Improving schools.

You could argue that investing in real estate today is risky. But I challenge you to name a time when creating wealth with investing in real estate involved no risk. The real question is, do you know enough to minimize those risks and maximize your profits? At Trump University, we bring you the knowledge that assures success.

Michael Sexton is President of Trump University.

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8 Comments

Posted by Richard F. Guyon on 08/16/2006 5:31 PM

This reminds me of my grandfather, who years ago had the opportunity to purchase a few sections of land just west of an area called Jasper Place in Edmonton Alberta, Canada. Well he passed on the offer since being a farmer and the land was mostly marsh and un-farmable. If he had foreseen the future of more than farm land, he would have seen this area is now ground that sits one of the worlds largest malls with what is still I believe the largest indoor amusement parks in North America, and a very large population of houses and apartment buildings. So no matter if property value is on a rise or decline, there is value in any investment into property. Finding the right property or determining the right management of the investment is key to making a good investment.

Posted by Larry Gessner on 08/16/2006 8:46 PM

These four stratagies are exactly what I have been trying to tell people in my area to focus on and make the improvement now before someone else figures it out and we loose another chance to grow and prosper. Thanks for sharing this with us.

Posted by Debbie Dee on 08/17/2006 1:35 AM

I believe investing in real estate is a long term investment. We cannot expect the result in short term. However, we must consider the secure of invest on real estate. Do we need to insure our investment? The perfect is minimise risk and maximise profit, is it possible in current time? Let us thinking over.....

Posted by Steven Marks on 08/17/2006 7:53 PM

While I always think this is great stuff, none of the so-called "no-money-down" programs or rental investment programs rraely ever discusses two glaring possibilities when you own ANY rental property no matter how you acquire it: 1. The cost of paying the loan on the property if you don't/can't rent it for any length of time (which you have no idea about), 2) The cost of the up keep for repairs, and even major ones that can suprise you (like interior wall pipe burst, or frozen pipe burst, mold, new roof, new water heater, new A/C system, etc.). I think it's not very forthright not bring these issues up. They make all this sound a problem-free venture. I know people who go into these income producing ventures, or consider these types of no-money-down deals without even asking themselves: "Do I have enough money to cover the mortage if I can't rent it for 2, 3 or 4 months?" Or, "Do I have enough cash put away to cover for a major repair BEFORE I buy the property?". You never hear much of these issues. More than likely, if someone is going into a no-money-down situation, more often than not, they have little reserve money in the bank from the outset. All these typesof situations never ask: "Do you have enough money from Day One to cover the mortagage and major repairs" as if a Genie is out there and will take care of all this for you.

Posted by Catherine Grayson on 08/19/2006 2:28 PM

In response to Steven Marks' comment, this is where a comprehensive entrance and exit stategy comes into play. If your are working with a knowledgable broker they should be able to advise you on this. If you have no reserves or very little reserves you should not be using 100 financing. This tool should be utilized

Posted by Lyn Marzano on 08/20/2006 7:52 PM

Having 3 rental properties for over 13 yrs and did not mortgage them out, I was able to just sell one to a long time tenant and I did well, but had I not purchased these when I could barely afford them I would be in terrible situation today. I think the key is to buy and hold and if a flip comes along that is just great

Posted by michele on 08/21/2006 2:45 PM

Do you also look at the Federal Excise taxes and new income tax rates in New Orleans? Would you use a local bank or an outside one?

Posted by Michael Stevenson on 08/22/2006 4:08 AM

Regarding Mr. Marks and Ms Grayson's comments: I live in the Los Angeles area where rents are exceedingly high pretty much across all of southern California. The "cheap rent" districts are few and far between from Los Angeles County all the way to San Diego county, which comprises a population of over 17 million. I am in the land business and know of several people who have purchased rental properties, and do well. However they have seen periods of no renters for a few months or more meaning they have to come up with the out of pocket money for these single family and duplex rentals to cover the mortgage and other expenses that would be otherwise profit. When you have very low interest rates like we had for a long time, invariably you will have less renters in the market because more people can afford to buy a home. Point is, Mr. Sexton and his team should highlight the fact and distinct possibility to would-be property investors that you should be prepared to go months for without renters and hhave the cash stashed to cover the loss (esp. if you are in a highly competitive market like L.A.). Don't always think the "inn will be full" every month. Buying rental property is not a cost-free endeavor no matter how creatively you finance it as some might think.

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