Real estate investing in a recession

Have you ever noticed how buyers flock to buy property in droves when real estate prices are at their peak, but buyers are relatively scarce when prices are more affordable? Despite the fact that this case challenges the generally accepted investing strategy to "buy low, sell high", we cannot avoid but wonder why social gatherings present during the real estate boom years of 2005 and 2006 would inevitably lead to engaging in a conversation about someone's real estate investment and the promise of future profits to be derived from the company. It's not surprising that many of those bragging recently your exploits of buildings has softened his tone while investor s experienced, inactive for six or seven years, have begun to once more lucrative investment property purchase start. Despite the news about the recent real estate and tribulations of the financial industry that the public apparently is bombarded with every day, the last months of 2008, since a relatively quiet, but increase dramatically, in sale of buildings.

The National Association of REALTORS R (NAR) reported that sales of residential houses increased by a staggering 115% when the last quarter of 2007 is compared with the same period in 2008. Have experienced investor s buy all this property was ignorant to steady streaming media reports warning of declining real estate values? The answer is no, they simply have been waiting for the right moment to emerge as a small swarm of locusts constantly spoon homes for sale as culture. In fact, buying his presence has been so prominent that national housing inventories of houses for sale decreased significantly during the last quarter of 2008, a reliable signal that demand is starting to once again catch up with supply.

But as these brave souls knows precisely when they are buying the market bottom? They throw caution to the wind and just force yourself to gather the courage to buy property although values can continue to decrease in the future? The simple answer is that investor 's savvy real estate buying property with the expectation of immediate appreciation in value. Instead, real estate investing should be purchased based on the potential of positive cash flow. Positive cash flow occurs when a property income exceeds cost the owner to keep the property. Therefore, when a property provides a positive cash flow, a decline in property prices is of little concern provided that the owner can simply enjoy the income your property generates until revive the market and the property can be sold for more profit.

During the years of boom our nation became blindly in love with the valuation of real estate prices, which represents the amount of value that a property will earn over time. So called House "flippers" blatantly leveraged money to buy multiple properties with the expectation that their values would increase, allowing them to sell the properties to handsome profits in a short period of time. These quasi-beginner real estate moguls, Add icted frequently for HGTV and other television shows created to promote the industry as flipping out and flip this House, regularly failed to consider Property cash flows before making their purchases. Why bother when real estate values will always continue to appreciate, alleviating the need to contain properties for a long time? After the bubble burst, many of these speculators realized that they shouldn't have built their homes investment of sticks and social gatherings became Nice once again.

Experienced investor s build your investments carefully and conservatively bricks analyzing cash flow potential property before you buy. The main reason that these investor s have sat on the sidelines during many years is that most real estate prices were too high to generate positive cash flow and a reasonable return on investment. It wasn't until recently that both House prices and multi family residential have retreated to levels where income will cover the monthly mortgage payments and other operating costs. In addition, with the construction of new homes and apartments slowing to a virtual halt, a local population still fastest-growing and many displaced families prevented properties, owner of an investment property is free to choose between a tenant base which is now stronger than ever. One can see clearly why a decline in real estate sales prices normally accompanies an increased monthly rental prices.

No matter what 2009 has in store for real estate investing, it is essential to remember that investing in real estate, should always be considered a long term. Although the opportunity for a "quick flip" can present themselves, the distinctive sound real estate investments is its ability to generate income no matter what the economy throws your way.

About the author:
Brian s. Icenhower, Esq., BS, JD, CRB, CRS, ABR, California Association of Realtors real estate Director, practicing lawyer, a real estate expert and consultant, legal counsel for the prosecution of Tulare County District Attorney Real Estate fraud. He can be contacted bicenhower@icenhowerrealestate.com or in www.icenhowerrealestate.com.