Based on CNN's latest money article, my market in Tucson is 25% over priced. Although the company did not post their algorithms in calculating these values, they may be right on the money. I believe it.
Its anyone's guess how the markets will equalize, but it should be a heads up for investors or anyone pursuing real estate. If I was in a very high price market like L.A. , I would get on the side lines quicker than you can say "watchout its a bubble".
Although this is the first time I will going through a market correction (I am still on the young side), I have been waiting for this and trying to plan my next moves. Its pretty obvious that houses cannot sustain such appreciation year after year.
As far as I'm concerned, you can make money in real estate any time, just like the stock market. I feel pre-foreclosures will still be a great avenue for picking up properties. Last year was tough, no one wanted to make deals when they were confident they could sell their house by themselves in two days. However, the seller's confidence is changing. The word is out, and it really is harder to sell houses. Rental rates are going up, however, interest rates are going higher so cash flow is still a challenge.
For my investor friends, its just a pain because it means less profit. They are smart, and when they sell a house, they sell it in 30 days, which means its lower price than anyone on the block. Thats what you have do.
It is interesting that real estate is not that liquid, if I did some deals that I almost closed on this year, I would have not been in great shape. Boy, am I glad that I did not lose focus on my buy criteria, "Make money when you buy".
The near future will be interesting. I will be focusing on foreclosures. I have been getting pretty good at marketing, so I am going to stick with what I'm good at. Besides, I get better deals than any of my friends, because I buy from motivated sellers.
I'm going to stay on the side lines until fall time frame.
I have heard a lot of horror stories of trusting property managers with your rental properties. However, they are a necessary evil, and when I start accumulating more properties there will be a time when I will transfer everything to them.
But for now, I am happy doing it myself. It is pain to get a new tenant , and I realize why a min one year leases are so desirable. I have one tenant moving out on the 31st, and today, I have a new lease with a year lease starting August 2nd! Only a vacancy of two days is great!
I must of got at least 30 calls for this unit. Here's a secret. Use Craigslist.com
Its free and its very, very effective. I've filled three tenants using this alone. Its amazing, its more effective than paying a $75 a week ad in the local paper.
I have to be honest, I am completely enjoying my break from real estate. I miss it though and think about it often (don't tell my wife), but its been good to spend more time w/ my son and working on my personal relationships.
There just doesn't seem to be enough time to do everything.. I don't think I'm a person that is over zealous, I just want a happy life, be able to do outdoor activities everyother weekend, and be a millionaire. That shouldn't be so difficult, right?
I now realize that my successful friends in real estate are sacrificing a lot to become weathly. It occurred to me that about half don't have any kids, which allows them to work harder. I do have one friend that has three kids, and he must not be spending any time with them based on the time he puts in.
In August, I plan to re-evaluate my finances to give me a update in my performance (everyone should do this). I have an excel spread sheet that does the following: 1) breaks down out salaries, and calculates pie charts on how much goes to 401k, taxes, insurances, take home, etc... This is very useful. 2) Income and expense sheet. This is very simple and I used the exact format as one of Kiyosaki's books. From there, I have a few charts that tracks net worth per year, and others.
I have other friends that are getting the burnout big time. They have followed in my foot steps and have rehab most of their properties. The last project has kicked their butts! If you remember, I birddogged a house next to my tri-plex. Its a 1930's house and they have owned it since October. They bought it for 75k and plan to sell it for around 250k-280k? They added two new rooms w/ a new bath, wood floors, succo on the outside, a/c, the whole works! She was the general contractor and they have done a lot of work themselves. They are getting the classic burnout from working with contractors.
We were talking that we need to go to lunch and brain storm ideas on working less and making more!