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Update

Since starting my book, Financial Freedom in 5 Years in 2005, the national real estate market has changed dramatically. I almost thought I should rename the book to “So it was a Bubble, Now What? or “What to do After the Bubble Burst”......

2000-2005 Boom

If you were to follow these techniques from 2000 through 2005 you would have noticed the declining in rents around late 2004 and early 2005. That is when the actual change occurred in most of the major markets such as California, and California. Those area simply became too expensive for the actual employed population to remain tin the areas. They were simply priced out.

That wasn’t the case for all areas in the United States. Salt Lake City, Utah was a bargain compared to the over valued areas to the west and south (California, Nevada, and Arizona). In 2004 Arizona and Nevada boasted a median home price well above $300,000 and some areas in California at a screaming $600,000 plus! Salt Lake City and Provo, Utah were at an affordable $150,000 median home price. Companies and employees quickly saw the value in moving from am area that they cold barely afford to an area that they could live a wealthier lifestyle.

                Salt Lake City and Provo Utah had some of the highest appreciation and population growth in the country. From 2005 to 2006 they saw appreciation grow at an incredible 15% from 2006-2007 some neighborhoods had greater than 25% gains.

                The same was true for North Carolina. As Florida became a hot spot for Speculation Investing the employed population was quickly forced to move north. Each time the areas gained value it forced more and more families north for more affordable living. This pushed growth into Atlanta Georgia for several years. Until 2005 when Atlanta too became a Speculators Heaven once again driving prices upward.

                This made North Carolina with its favorable weather and vast open areas a true bargain for employers and families. While Southern Florida began to find it harder and harder to sell North Carolina was a sellers dream with buyers begging to buy the low $100,000 homes.

2007 Mortgage Crisis

The changes in the mortgage industry too many by surprise, from June through December many insiders felt that even the banks didn’t know what their next step was. There are two sides to this issue. The bad side: It will be much more difficult for us as investor’s to obtain mortgages. We will be seeing less or No Stated Income loans, Higher Down payment requirements, and higher Interest rates.

So if you are a new Investor with little money and not a great credit history you will need to be more creative. May be you will need to buy a property for you to live in, Usually during times like these the local government will come out with incentives such as Down Payment Assistance programs to encourage renters to become buyers. This creates an opportunity for the new investor to move from home to home every 6 months to a year to establish occupancy under the terms of your loan then rent the property and move to the next property.

The good Side: It will also be more difficult for the owner occupants, many used the stated income loans and the 80/20 mortgages to qualify for little or no money down. As these loans are harder to find and harder to qualify for the potential buyers are forced to rent. The more renters in a Market the Higher the rents are and properties are rented quicker due to the shortage of quality rental property.

2008 Sub Prime Meltdown

While Leman Brothers, Washington Mutual, and Wachovia fall into the history books, many investors find themselves with cash in the bank and little to no ability to qualify for a traditional investment property loans.   Bank foreclosure inventory will continue to increase through 2009, thus property values will continue to drop leaving hungry investors salivating on the sidelines. Go to your local bank to establish your relationships now. Local banks will be the best chance for leverage in the new economy.

Predictions 2009-2012 Markets to watch

Energy: Continue to follow the energy markets including renewable energy, energy technology and energy mining. With the current world climate it is unlikely President Obama will discontinue local oil and gas exploration. This being said Colorado, Wyoming, Texas, and Oklahoma, due to their low property values going into the recessions and ability to provide employment through the recession give them the best chance of continued and stable growth.

Military: The speculation on Military Base Realignment and Closure of 2005 didn’t have the instant impact many were expecting, due to the deployment of the troops. Most believe we will be seeing large return of the deployed troops over the next two years. This influx, of the returning troops and their families, into the now consolidated areas will greatly impact the areas that the bases remain. Look to Ft Benning Georgia, Colorado Springs Colorado, Fayetteville North Carolina, Little Rock Arkansas, and Lawton Oklahoma in that order for the most stimulated areas.

Financing: Investors will begin to use creative financing techniques from the eighties to bridge the gap between the low values and inability to get a conventional loan. I suggest speaking to your attorney about how to correctly construct a “Wrap Around Mortgage”, how to purchase properties “Subject To” and brush up on your “Lease Options” while you’re at it.

Disclaimer

The techniques I this book are designed to give investors an edge and instill greater thought prior to making their own decision to purchase a property. Examples, Graphs, and even the Predictions are by no means an endorsement or guarantee that these markets will increase. All loans, techniques, information, including but not limited to foreclosure, 1031 exchange, taxes and legal advice are subject to your local laws and legal interpretation. Please your local attorney, CPA, and Realtor for advice regarding these issues.

I ask you to ignore the News follow your gut and do your own research. Simply remember the laws of Supply and Demand. If there is an increase in rents, population, and employment values are sure to follow.

-Sean Moudry

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For more information contact Sean at:  seanmoudry@kw.com