Everybody knows it's a real estate buyer's market. That doesn't mean, however, every house on the market is a good buy nor does it mean that buyers should be buying everything on the market. There is a fundamental question that every would-be buyer needs to ask: "What is my purpose in buying real estate?" Buyer A may want long term capital growth. Buyer B is looking for a way to shelter some income from tax consequences. Buyer C is attempting to generate a nice chunk of change on a flip and Buyer D is just looking for a way to generate monthly cash flow. No matter how good a buy a property might be, unless it meets the buyer's goal, it won't be a happy experience. For example, my comfort level in investment property is limited to whether or not anticipated rental income is sufficient to service the mortgage, property taxes, insurance and upkeep. That means I resist buying a vacant lot or acreage no matter how underpriced it may be, because it won't generate the monthly income needed to pay the cost of holding on to the property. Others with deeper pockets and a penchant for a greater risk to greater reward ratio might jump at the chance to tie up that lot. For those with nerves of steel and a desire for fast returns, the market is ripe with opportunity. This is a time when list prices must be ignored and fear of insulting a seller set aside. A buyer that fits this category should be having the time of his/her life while driving a realtor insane with crazy low-ball offers and creative strategies that only a few sellers would even consider. Keep in mind two very important factors: 1. We don't know if the market has bottomed out yet. 2. You make money in real estate on the purchase, not the sale. Whether you are an investor or just looking for a new place to call home, now is the time to buy.
Special contribution from Larry Refsland, who makes a practice of shocking realtors and sellers.
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