Whether you are a homeowner, real estate investor, realty sales agent, mortgage lender, real estate attorney, or someone else connected with the nation’s largest industry – real estate – the year 2003 was probably a very good year for you.

To everyone’s surprise, 2003 was the best year in recent history for new home sales volume (1.1 million), resale home sales volume (6.1 million, compared to a record 5.5 million set in 2002), a record $3.4 trillion in new and refinanced home mortgages (compared to the $2.2 trillion record volume set in 2002), median home sales price increases of 9% higher than 2002, and average market values of existing homes rose about 5.6% in 2003.  Perhaps more important, the inflation rate for 2003 remained very low, somewhere around 2% to 3%, depending on whose statistics you believe.  Average mortgage interest rates were 5.8% for 2003, setting a record low in June 2003 of 5.3%.

What’s ahead for 2004?  Most economists predict slightly rising mortgage interest rates.  But what do those high-paid economists know?  At the beginning of 2003, none of the esteemed economists for the Realtors, home builders, and mortgage brokers predicted the record-low home mortgage interest rates which bottomed out in June 2003, resulting in the best year ever for home sales volume.

If you discover somebody who knows for sure what will happen to real estate market values in 2004, please let me know.  The “experts” were wrong for 2003.  That’s why I don’t predict what will happen in the future for real estate – my crystal ball is always foggy!  However, over the long term, real estate ownership benefits have far surpassed any alternative investment such as the stock market, mutual funds, bonds, savings accounts, etc.  There is no indication that will change.

The long-term trend for U.S. real estate market values, ever since property valuations were first recorded, has always been up.  But there are peaks and valleys along the way – with some plateaus too.  However, occasionally real estate values decline and never recover – look at the one-industry ghost towns where the major employers closed and weren’t replaced with other employers.  Fortunately, those situations are very rare.  But there are currently many local “price pockets” which suffer depressed values, especially upper-end luxury houses in many communities.  To illustrate, a few weeks ago I asked a local Realtor what happened to a local mansion that was listed for sale at $25 million in 2002.  “Today, you can buy it for just $15 million,” he replied.

HOW TO FIND TODAY’S BEST REAL ESTATE OPPORTUNITIES.  It has been over five years since I last wrote about the best real estate profit opportunities.  Frankly, not much has changed in real estate investing.  What was good then is still good for investing today. 

But I’m not talking about buying foreclosures in distant Podunkville, or rushing to buy pre-construction houses from a builder who is desperate to make sales to qualify for his construction loan.  Exact investment opportunities will vary by community.  But the general principles and types of best realty investments remain the same nationwide.

Our focus is on profiting from today’s best real estate profit opportunities.  Some of the suggestions will surprise you.  Others will re-focus your attention, opening your eyes to opportunities you might have forgotten about or overlooked.  Fortunately, one thing has changed for the better in the last five years – money to finance sound real estate investments has never been so abundantly available at very reasonable interest rates.

But when I hear about investment gurus hawking their out-of-town VA and FHA investment foreclosure bargains, often to member at the local real estate investor clubs or in newspaper classified ads, I cringe.  If these properties, located hundreds of miles away, are such great investments, why aren’t the “locals” who live near these incredible bargain properties buying them?

As always, I suggest acquiring investment real estate within, at most, a one-hour drive from where you live.  Please be extremely careful if you decide to put your trust (and money) within someone you just met and don’t know.  I can recite names of real estate scam artists who lost big money for their investors – some of them are still out there selling their expensive real estate courses and investment property partnership schemes.  However, I must hasten to add there are many “good guy” real estate seminar teachers too – but it’s often hard to tell the difference.  A sound rule to follow, if you invest money with someone you don’t know extremely well, is to be sure it is money you will never need to see again!

1 – PLAN YOUR STRATEGY.  Why are you reading this report?  Are you looking for quick real estate profits by next Friday?  If so, you’re looking at the wrong investment.  Maybe you can earn huge quick profits buying stocks, or perhaps trading commodities such as pork bellies, soybeans, or something else.  But, with rare exceptions, unless you plan to hold your real estate profit opportunity at least a year (longer is better), if your strategy is to earn a quick profit, maybe real estate isn’t right for you.  Most real estate is a get rich slowly but surely investment!

2 – DETERMINE YOUR INVESTMENT ASSETS AND GOALS.  If you’re broke, have no cash for a down payment, have a lousy credit report, and are unemployed, it will be more difficult to benefit from today’s real estate opportunities than if you have a modest cash down payment, good credit, and a solid source of income (other than welfare) so you can make profitable real estate purchases.

But don’t give up.  The best real estate investments I ever made occurred when I was just starting out but had strong real estate investment goals.  Whatever your personal situation, you can succeed with real estate too.

Having invested in real estate and “hung around” successful real estate investors most of my adult life, I’ve seen and heard about most types of good and bad real estate investments.  A special benefit of teaching real estate law classes at our local community college for almost 30 years is I’ve met hundreds of wonderful students who share their success (and sometimes failure) experiences.  Many of my students didn’t realize all their opportunities. 

In my opinion, too many real estate agent students focus on selling real estate to earn quick sales commissions, but they fail to see their long term realty investment profit potentials are much bigger.  Other students were totally “unfocused” dreamers who have pie in the sky ideas but no practical plans to implement their dreams.

EXAMPLE:  Last semester’s class included a nice young man who told me he wants to buy run-down shopping centers and office buildings to earn profits turning them around.  When I asked what real estate he already owns, he said he didn’t own any real estate yet.  My suggestion was he start out small, perhaps fixing up a few run-down houses and small apartment buildings to gain experience.  I’ve learned it’s best to make a small mistake on a small property than to make a big mistake on a big property where the financial consequences can be devastating.  Even Donald Trump makes big real estate mistakes.  But, so far, he has been able to recover from them.  Most of us aren’t in that high-stakes league (and don’t want to be!).

3 – YOU CAN DO IT HERE!  Lastly, let’s get out of our minds the “you can’t do that here” attitude.  I’ve been hearing that remark ever since I began investing in real estate when I bought my first property for $28,000 in Redwood City, California.  My friends thought I made the biggest mistake of my life buying that triplex with a $5,000 down payment borrowed from my parents (yes, I paid them back!).  When I bought my current home for the then outrageous price of $207,500, the chairwoman of the Real Estate Department at the College of San Mateo, where I had just started teaching, thought surely I would be filing Chapter 7 bankruptcy within weeks.  Today, my home is worth many times my purchase price.

EXAMPLE:  Just a few weeks ago, one of my best friends showed me his latest real estate project.  He bought a run-down house in a good neighborhood for about $400,000 and spent $60,000 beautifully remodeling it.  Today, it is worth at least $600,000!  Not bad for about six months of work.  I realize those numbers scare lots of readers who are fortunate to live in less expensive communities.  But the point is you CAN earn real estate profits where you live, even if you live in an expensive area.  If your community has lower real estate costs, consider yourself very fortunate because you don’t need much money to start.

 

COPYRIGHT 2003 BY ROBERT J. BRUSS

This publication is intended to provide scant and authoritative information. It is sold with the understanding the publisher is not engaged in rendering legal services to readers. If legal or other expert assistance is required, services of a real estate attorney or other professional should be obtained.