- Image by nancyarora2020 via Flickr
The first decade of the 2000′s saw an incredible bubble created in real estate. A perfect storm occurred in that credit was cheap, standard buying guidelines were thrown out the window, and banks lent money to anyone with a pulse. In turn, housing prices went skyrocketing, seeing valuations that had nothing to do with reality. People purchased multiple homes even though they were working a job that was barely above minimum wage. Long time home owners decided to take the equity out of their homes and spend on frivolous items. All of this combined into an inevitable bursting of the bubble.
Now banks are much more cautious to lend money for any type of mortgage. What this means for the investor is that more money needs to be brought to the table in order to get a loan done, and even then it’s not guaranteed. To be sure there are lenders out there who are still financing on a less restrictive scale. They may require research and a thorough investigation to make sure they’re legitimate, as well as charging reasonable interest rates. As always, buyer beware.
Homes are still selling, just not at the prices they once were, nor at the same pace. There’s no guarantee that a home purchase and rehab will turn over quickly. Select housing in an area that is stable and in a desirable location. A home will turn over much more quickly in this area as opposed to one that’s on the marginal fringes. Be prepared to pay more for a distressed property, and expect a lower profit. The upside is that the house will most likely sell in a shorter amount of time, bringing that profit in sooner. There’s nothing worse than making a bad decision and having to sit on the investment for years instead of months.