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Buying real estate as an investment is a popular, time-tested moneymaker. Techniques and strategies vary by investor, and by local markets. But the acquisition and short- and long-term strategies can also depend greatly on economic factors.
At this time in the U.S. economy, foreclosures are a popular investment option. There are a large number of foreclosures for sale, including a wide variety of properties, comprised of residential, multi-unit, and commercial units.
With the recent passing of new bills including H.R. 3221, the Housing and Economic Recovery Act of 2008, aimed at helping 400,000 home-owners avoid foreclosure, and the "bailout" bill H.R. 1424, the Economic Recovery Act, the real estate industry should see some interesting trends and changes in practice in 2009, including the following:
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End to seller-assisted down payments — H.R. 3221 eliminates seller "down payment gifting" on FHA loans beginning October 1, 2008. This tactic used by the seller to assist buyers with down payments was a good way for builders to quickly move their inventory of new homes. Because the tactic was heralded by non-profit organizations and creative financing supporters as beneficial, many are pushing to overturn this stipulation of the recently passed bill.
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Record number of foreclosure opportunities on the market — In many markets, innumerable foreclosed homes are sitting vacant. Purchasing bank foreclosures at a discount, then rehabbing them (as needed), and renting or selling them can prove lucrative.
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Purchase of more properties during pre-foreclosure — Purchasing properties in pre-foreclosure, that is, before foreclosure proceedings have been completed, allows the investor the most negotiating flexibility. There are many techniques that are effective in this situation, but the most popular continues to be the "short sale." A short sale is when the bank agrees to accept an amount less than the amount owed by the home-owner as payment in full. In this case, the investor must work with the home-owner and the lending institution to satisfy all requirements and gain approval from all parties for the short sale to succeed.
Real estate trends can change quickly, and develop in reaction to the mood of the market. If an investor can size up the needs of the local market and the economy and target accordingly, he or she will be in a good position to predict future trends and therefore adapt techniques as necessary.
The key is to understand the dynamics of your local market, watch the economy, and allow yourself the flexibility to change approaches depending on others' needs. It is then that you will have your "pulse on the market" and be able to maximize your profits in real estate investing.
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