The sky is falling!  The sky is falling!  No, this is not a Chicken Little fairy tale.  If you work, invest, or even read about the real estate markets, you will hear this kind of gloom and doom every day.  Just yesterday for example, the CEO of Countrywide stated that on a national scale, that they don’t see a major rebound in housing until 2009. 

On the other hand, there are a lot of professionals that I know that are quietly picking up some very good opportunities. 

So, if you are like most investors out there in real estate, then this is probably your current mentality:

“I know real estate makes sense, and I know that people make lots of money in down markets. However, I don’t have a clue as to what I should do personally right now?”

Quite frankly, I have been asking this for my personal account over the last few weeks and it was not until after visiting multiple markets and talking with many, many developers, marketers, etc. that I could even answer that for myself.

Bottom line is that there are a bazillion opinions out there, many of them quite sophisticated, but in all honesty, nobody is very good at predicting market turns.  The funny thing is that history has shown us that there are tremendous opportunities for investments in down markets that pay MUCH better than in up markets.  That is the good news.  The bad news is that if you use the same methods to invest in down markets as you do up markets, you will not do very well. 

For a couple of months now, we have been silent here at GetPreconstructionDeals.com.  Why?  Simply we have been analyzing a TON of opportunities, lender relationships, developer relationships, and communities to really get a good idea of what is happening out there.  What we did not want to do is put out information and articles that were confusing or not in line with the market and quite frankly, we have had to really look and dig hard to form our own opinions of what is really going on.  

So today, we are going to start a very up-to-date series on what we see serious real estate players doing with their money.  Believe me, they have not all packed up and gone home.  Conversely, they definitely are not throwing money at random opportunities. 

Our end goal for this article series is to let you take advantage of our 1000’s of man hours that we have invested really asking the most important question for real estate investors……

What Do I Do Now?

The General Overview:

As you can already surmise from the popular press, there is three fundamental issues going on that are impacting the real estate markets right now:

1. Oversupply of inventory in many markets (but not all);

2. Serious credit tightening by mortgage lenders;

3. Prices out of line with rents.

None of this is a real surprise given the previous boom in real estate markets and honestly nobody knows exactly how all of this works out and when.  But what all the experts know is that this is all simply part of a normal real estate cycle and those that position themselves well now will be handsomely rewarded when good times return.

Also, let me tell you from my own personal travels, things are not as bad EVERYWHERE as you would be led to believe from the national press.  As an example, we were in middle Tennessee last week and many of the real estate products there have appreciated 10-20% over the last 12 months.  Now admittedly, these markets are not widespread but there are many, many markets that are performing quite normally despite all the gloom and doom that is out there.

What Are The Pro’s Doing Out There?

In writing this article and choosing an approach to convey the information to you, I wrestled with either taking the approach of telling you what is not working and why (a pretty long list) or instead show you what is working.  I have chosen the latter approach since a lot of information about how to really look at opportunities can be conveyed this way. 

For this article, the intent is to highlight what the pro’s are doing that is working and is likely to work going forward.  In subsequent articles, we will dive into each topic so you understand the in’s and out’s of what is working and why.

So, our short list of what the pros are doing is provided below:

Sitting On Cash

By far the most common approach that people are using is managing their current investments and simply maintaining cash and credit reserves for the right opportunity.  Since this approach is obvious, I will not expand upon it in subsequent articles.

Buying Tax Advantaged Plays

Historically, only the very wealthy have been able to create some elaborate real estate techniques to shelter incomes.  However, Mother Nature has given some of us what is (hopefully) a once in a lifetime opportunity to participate in tax advantaged investments in the Go Zone with 50% bonus depreciation.  Unfortunately, most of the opportunities we see for small, private investors in the Go Zone do not make sense.  In this article, we will show who should consider this investment, what they should look out for, and how they can find something now that works for them.

Pooled Investments Via Private Placements

Money is very hard to come by right now for builders, developers, and even individual real estate investors.  For professionals right now, there are outstanding opportunities available to participate in activities from land acquisition and development, to home building in the right markets, and commercial development.  If, however, the professional cannot get financing, then nothing can move forward.   This is where private investors can come in bringing both cash and credit ability and get compensated handsomely for doing so. 

For individual investors such as yourself, this whole area of pooled investments present two basic problems:

-         The investor has to be accredited; and

-         Since SEC will not allow people to advertise for this type of investment, it is difficult to learn about really good opportunities.

In the article for this topic, we will give you an idea of what is going on in the private placement marketplace and the types of things that you should be looking for in order to participate.

One Of A Kind Opportunities

There are some opportunities that you will come across in this environment where you realize that weak market or not, the concept absolutely makes sense.  As an example, we have been exposed to something coming together in the Gatlinburg/Pidgeon Forge area.   Whenever I discuss the concept with someone knowledgeable about the area, they all respond with a resounding..... “oh wow, that should work great”.  But even then, in slow markets, we can’t invest foolishly no matter how much we like the concept.  In the article for this topic, we are going to highlight what you should be looking for when evaluating such an opportunity.

Bargain Basement Purchases

How would you like to own something for $0.70 on the dollar or less?  Well, there are lots of opportunities to do that right now, especially in higher end properties.  In many areas, you can pick up some absolute deals that you can pretty much guarantee will treat you right in the future.  But, there is a major difficulty here…… you must be willing to suffer through some possible, long painful holding periods.  And then, when you analyze it, is it such a good deal?  In some cases the answer is ABSOLUTELY and in others, it is a horrible investment.  In this article, we will highlight the pro’s and con’s of this approach.

Cash Flowing Rentals In Solid Fundamental Markets

 The last approach, which in my opinion will never go out of style, is picking up good rental properties in strong areas that are growing now and expected to continue to do so.  While this sounds easy, unfortunately this market has made this type of opportunity about as rare as hen’s teeth….. Why?  Because the prices have gotten out of line with rental rates (and other affordability measures).  In this article, we will review some of the major do’s and don’ts for this type of opportunity in our current market.

This list is what we believe is working out there today and is likely to continue to do so if implemented properly.  Many of the other techniques that were common in 2004 and 2005 just are not appropriate in this market.

Finally, to address a question that we have been getting a lot lately….. “When will the next project be available at GetPreconstructionDeals.com?”  Our policy has always been that we will only offer those opportunities that make sense to us.  So in this market, the answer maybe a few weeks (we are always looking at several deals) or a few months.  When we do offer the project, however, it will be because after careful analysis, it makes sense to us.