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The Question 

This is a question that every real estate investor should be asking someone right now or even two years ago for that matter. Everyone wants to know “when”, but will you be in the best position when it does?  You can turn to your local PBS radio station and hear forecasts about when.  You can read real estate market experts like Steve Bottfeld of Las Vegas. He says sales will increase in 2008 by 25% for new homes and 45% for resale homes.  Steve explains that new home prices will increase by 8% and resale home prices by 10%.  The fact is that no one knows when the market will begin to flatten.  Notice I said flatten which is still better than the recent trend of falling prices. 

The Real Question

 As an investor my big question is “what”?  What will the real estate market be once it does begin to upswing?  There is also an underlying question of “how” it will upswing as well.  What will be the best position for an investor when it does?  The best way to determine how and what may be to look at the past recessions and see how those investors profited.  Since there is no official term for the current market, I will refer to it as a downturn.  According to some, this may be the worst foreclosure market in 75 years.  Some experts say they expect losses to reach close to 1 trillion dollars in foreclosures by the end of the year.  Because of this, there are many investors working the short sale avenue to riches.

The Answer…

Many real estate investors that lasted through 1990-91 recession made out very nicely, once the economy began to upswing.  The Sept 11th and the dotcom busts in 2001 prompted the feds to drop rates faster than at any other time in history.  This sequence of events served as a catalyst for the real estate explosion the country experienced for the next 4 years.  Is this the reason we are in the real estate dilemma that exists today?  This time around I hope we’ve all learned our lessons.  The market probably will not experience a surge like that again in our lifetimes.  Let’s hope not at least.  This time around the rebound will be slow.  Slow and steady would be great but I expect more slow than steady.

For the investors that are in it for the long haul, the rules haven’t changed much.  Buy low, rent for residual income, leverage your existing assets, and cash out when you’re ready.  Yes this works for house flippers too.  Diversify your portfolio and don’t have all your eggs in one basket.  When the upswing comes you will be in a good position to cash out.