This almost goes without saying but is definitely worth repeating. Do you know the geographic area, are you on the right side of town (there always is one) and do you know which way the market is headed? There are also opportunities in any market but you need to understand which way it's moving (up, down or sideways) in order for you to adopt the right strategy.

Know your Real Estate strategy

In a down market you are looking for foreclosures and distressed sales with the strategy of getting the property even cheaper than market value, but flipping isn't your intention. Your best bet may be long term rental or creating a lease option (more on that later). A new construction flip would not work and end up costing you money, remember if something does not appreciate; it still costs you 6% to sell.

You need to go in for the long term and when the market does turn, it will go up multiples. A quick example, I did a loan for a friend of mine for a home he bought out of foreclosure in 1995 in San Diego when the market was soft. He purchased a 3bedroom, 2 bath house with a bay view for $165,000 and a down payment $33,000. I always thought it was a cool house. He has since renovated it and he's probably dropped $80,000 into it over the years. Now it is worth over $1,000,000. It does not take a lot of home runs like this to make some money. Admittedly, it took ten years but it doesn't hurt to have made over $800,000 along the way.

In an up market, foreclosures are much more difficult to find. All the investors are competing for them. Up markets are good for flippers which are what the current wave of real estate investors really are. Up markets do present opportunities to do this but also creates substantial risk because payment far exceed available rents, making it hard to cover your bases.

Fixer opportunities are rarer again, more investors are competing. But who cares, buy again, if anything the market is going up; high-rise condos in Vegas for example. Now I?m glad I did buy one three years ago in the building Panorama Towers, which is just getting done next spring I think my price is $212,000 and it is probably worth $350,000-$400,000. Again, covering my bases strategy was in place, even if it didn't go up I could afford a 10% hit and I knew that as a vacation/ weekly rental that I would break even based on the prices of hotel room in Vegas.

Back to my point now, everyone is buying high-rise condos in Vegas, and the prices are hitting over $500+ / square foot, that is the same as San Diego. And believe me you would rather live in San Diego. Now the party is over. How much higher can they go especially when they are building more supply like it's going out style (and it will go out of style). Evana Trump just announced she's building the tallest residential tower (she's a developer?) on the West Coast (80 stories), that tells me it's time to sell not buy. And is what am going to do with my unit once it's complete.

I hope this has been helpful. Feel free to contact me if you have any questions.

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