The Real Estate Gravy Train Has Derailed, and the Easy Money from Quick Home Flipping Is a Thing of the Past. but Real Estate Investing Is Hardly Dead; Savvy Investors Are Just Taking a Detour. Changing Course

By Light, Joe | The Florida Times Union, November 27, 2006 | Go to article overview

The Real Estate Gravy Train Has Derailed, and the Easy Money from Quick Home Flipping Is a Thing of the Past. but Real Estate Investing Is Hardly Dead; Savvy Investors Are Just Taking a Detour. Changing Course


Light, Joe, The Florida Times Union


Byline: JOE LIGHT

Going by recent headlines on the sagging home market, you might think real estate investing is dead.

Jacksonville hasn't seen the major price corrections that have nailed markets in South Florida and the West Coast - at least so far. But like in those places, Northeast Florida's home flippers - those guys who bought for $200,000 and sold for $300,000 a few months later - have almost left the buying side of the market completely.

If you're looking to buy a home for investment purposes now, you can't expect the home to show the same price appreciation that was seen last year, says Charlie Clark, a real estate consultant who has several builders as clients. But for those looking to buy, builders have offered impressive incentives to offset the cost of a new home.

The number of home resales dropped 23 percent between September 2005 and 2006, according to the Florida Association of Realtors. The sales drop off gives buyers a wide range of homes (with anxious sellers) to choose from, and that competition may have already caused home prices to ease in the area: They were down 2 percent between September 2005 and 2006, according to the association.

Officials from the Northeast Florida Builders Association say the current climate is exactly what makes it a good time to buy, but if you have the choice to buy your home now or later, you have to ask yourself if you think the local market's reached bottom or if there are more discounts to come.

Regardless, the buy-and-flip model of investment is on the skids for now. But there are several other ways to make money in real estate.

joe.light@jacksonville.com, (904) 359-4689

BUYING ON THE BLOCK

The real estate bargain basement doesn't end with discounted resales or with new homes that have piles of incentives.

As adjustable rate mortgages start saddling homeowners with payments they can't handle, investors might be able to find good deals in foreclosures, says Terry Loman, owner of North East Florida Foreclosure Inc. Loman's company, online at www.neflforeclosure.com, tutors investors wanting to break into the market.

Recently, Jacksonville has had one of the highest foreclosure rates in the country, clocking in at one foreclosure per 189 households in the third quarter, according to RealtyTrac, which provides foreclosure data to real estate professionals. That ranked the city 22nd out of the 100 largest metropolitan areas in the United States.

Although the foreclosure investors sometimes are derided as taking advantage of homeowners' distress, in reality, they sometimes help those owners get out of a bad situation without losing everything. It beats the alternative: Once a home reaches the steps of the courthouse, the situation is out of the owners' hands, anyway, and the bank tries to get rid of it as quickly as it can without losing too much money.

To get into the foreclosure business, you're going to need money. Homes in foreclosure can range in price from a $30,000 rundown shack to $300,000 beachfront condos. Depending on the segment you want to target, you'll need a loan - but loans to investors are treated differently from traditional home loans and are usually given by banks you've never heard of.

Oftentimes, it's difficult to have a full understanding of what you're buying before you do, especially because the homes might still be occupied. So there's inherent risk involved.

But according to Wes Savage, former president of the Jacksonville Real Estate Investors' Association, one of the most cutting-edge ways to get into foreclosures right now is to buy homes before they hit the auction block. Check with the county clerk's office for foreclosure listings. Investors can negotiate down loan amounts with the bank and buy the homes from the owners at a discount.

That way, they both see the house that they're buying and don't have to compete with other bidders on the courthouse steps. …

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