Four years ago, the house in which I live sold for $390,000. The real estate market in my area (urban Northeast U.S.) was at an all-time high, and rocketing real estate prices - which fueled high rents and the promise of good rental income - had drawn thousands of investors into the arena. Today, while the house is still valued at $390,000, its market value is significantly less. Similar homes in the same and similar neighborhoods are selling for $205,000 to $250,000.

Stories like this are common across the country, though this one is at the extreme edge. While many people who took advantage of low interests, easy loans and adjustable teaser rates are facing foreclosure and loss, there are ways to take advantage of a depressed market and profit heavily from it. Here are some tips for taking advantage of a depressed real estate market to build your own nest egg.

1. Understand basic principles of profit.
A savvy investor, whether in real estate or any other market, understands one basic principle - the time to buy is when prices are low. While tumbling real estate prices and a stagnant market are bad news for homeowners who bought in the past five years or so, they're excellent news for those who are in a position to buy now, especially for long term investment.

2. Know why you're buying.
There are three major reasons for buying a home in any market: to live in it, to flip it, or to derive steady income from it. A depressed market is an ideal time to buy if you plan to hold the home for a while - not so great if your intent is to flip the property. Flipping properties depends on stable market values or a rising market. A depressed market makes flipping riskier, but not impossible. In fact, if you choose carefully and find real bargains, you may be able to flip properties with a minimum of investment in fixing up.

3. Yesterday's HOT markets are today's opportunities.
When real estate markets get hot, they attract more builders to put up more properties in the hopes of cashing in. Many of the hottest real estate markets of the past five to ten years are now "overbuilt", with far more properties than there are buyers. It's an ideal time for a buyer to come in and purchase stagnant properties at bargain prices. Remember, the reasons that made the area popular still exist, and population will continue to grow. It's just that construction has temporarily outstripped demand. A savvy buyer can take advantage of bargain basement real estate pricing to purchase high end luxury properties, or buy two for the price they'd have paid for one five years ago.

4. Think back to basic economics.
In a rising real estate market (rocketing in some areas of the country), savvy investors were looking for the quick buck. The idea was to buy now and sell higher in a very short time. With real estate values stagnant and even dropping, the shift is to thinking in terms of income generation and cash flow. Rental income is where it's at. In cities around the country, rents have been driven by the inflated value of real estate. As real estate prices come down, rents will - but rental decreases will take a lot longer to fall.

Page 1 of 2 :: First | Last :: Prev | 1 2 | Next