How The Interest Rates Will Affect The Creative Real Estate Market

How the interest rates will affect the creative real estate market

Last month I wrote about the media?s near fanatical predictions that there is going to be a ?Housing Bubble.? As I explained in my missives, I disagree with the media predictions but who are we to fight them. They are too powerful, they have the eyes and ears of the world. Many people believe what they see on the news and read in their newspaper / magazines as well as on the internet.

So why should we be the little voice in the forest yelling that now is the perfect time to get into the market rather than out. First off, I am perfectly happy with being the reverse of Chicken Little. Does that make me Big Chicken? No weight jokes, I?m sensitive! Anyway I digress.

I hope that people do listen when I say that there are many opportunities available. Not just because I feel the market is going to still climb. But also because I feel that as an educated creative real estate investor we will be there to pick up the pieces.

The number of new home buyers in the last several years who have bought just beyond their means by using new mortgage options out there like Adjustable Rate Mortgages (ARM), Option ARMS, Cashflow ARMS, Home Equity Loans and the like have sky rocketed. They are just now beginning to feel the pinch as a result of their choices.

Believe it or not many people have been tapping into their home?s equity to buy cars, boats and expensive vacations. Others do so to pay off their credit cards, only to max them out again later.

Then there have been a few items passed by the government that change the Bankruptcy laws as well as the minimum payments on credit cards. This will all have a compounding affect on their pocket book and their financial health.

More people are in foreclosure now than they have been in the previous half century or so. This statistic changes on a weekly basis as to how long ago it goes back but that doesn?t matter. What does matter is that the rates are ungodly high.

You may be saying to yourself, I thought Paul wasn?t going to just reiterate what the mainstream media is saying about the Housing Market. I thought he was going to tell me why now is a good time to invest? What is this guy drinking? I mean Thinking!

If you look a little bit deeper into what I am saying above you will notice that there are a ton of opportunities to get good deals on property for the creative investor. For every person who has an adjustable rate mortgage, I see someone who?s housing expenses is out pacing his earnings growth? i.e. pay raises. Imagine being a couple who let their emotion and real estate agent sell them a house that they really could not afford but was led to believe that they would be making enough money in two, three, or five years to be able to cover the adjustments to their monthly payment.

Now the payments are a couple of hundred dollars higher than they used to be and now the credit cards are a little higher than they use to be because they had to fill the house with furniture or they bought life?s little luxuries. Now they are both working full time, one of the couple also works weekends to make a few extra dollars and they still can?t make it. They need help.

They decide to sell their house and rent for a while until they get back on their feet. Get some of their bills paid down then they can find a house more in their income range. So they call their local Real Estate Agent and find out the truth about selling their house.

When they purchased their home they got the good deal of being able to buy their home with 100% financing. The house appreciated but they have not lived in it long enough to have made more equity than it costs to sell the house. The Agent gives them the cost to sell sheet and they realize that they will need to bring more money to the closing than the new buyer will.

They are devastated and stuck in their life with no way out. They then get further and further behind. All of a sudden they get ?THE LETTER?. ?THE LETTER?? you may ask? Yes the one that tells them they are about to be foreclosed upon.

This is terrible and devastating to them. This result happens over and over again all across the US. There is something that we can do though. We can help these people by getting them out of their jam before they receive ?THE LETTER? or after. You as a real estate investor can buy their house.

But Paul, you just said that they didn?t have enough equity to sell their own house, how can we buy it and then sell it at a profit? That is where being an educated real estate investor comes in. There are many tools in a well educated investor?s belt. Subject To, Lease Options, Assignments, just to name a few. The more you know the more you can come up with solutions for the problem as well as a way to be profitable for yourself.

Remember you are in this business to make a profit, you will not be able to help people if you are not in business. Conversely you won?t be in business if you don?t make a profit. You may be able to make a profit when you are uneducated but imagine the possibilities when you have a tool belt full of interesting options.

The lesson here is that the opportunities abound. You just need to get the proper tool to do the job. That is the mission of REI Success: To assist real estate investors in getting their education through offering seminars and by offering the products online as well. Visit www.reisuccess.com to review the offerings available from home study courses to bootcamps to weekend seminars where you can listen to some of the best national speakers in the business.

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Paul Galasso is President and founder of REI Success, LLC. Real Estate Investing Success is an investing education company dedicated to helping investors hit their strides faster allowing new investors to become independent more quickly and giving them more control over their future earning potential. For more information visit www.rei-success.com.