Rare Buying Opportunity for Real Estate Investors

Last week, I posted a piece on investing in real estate through REIT. The following guest article is on the same topic and is written by Tom Kerr from MortgageLoan.com.

Savvy stock market professionals know that the best time to buy is when everyone else is selling. The same holds true for real estate investing. A strategic mortgage refinance plan can help you take advantage of opportunities in the current buyer’s market by freeing up the money needed to snag property at bargain prices.

Going against the trend can make you a winner; but it takes tremendous courage to step up and buy when others are running for the exits. The philosophy of jumping on the wagon while others are hopping off is referred to as “contrarian,” because it runs contrary to conventional wisdom.

But markets function because of the simple principle of supply and demand. Those who have enough cash to buy while others are desperate to sell, come out on top in the long run. The easiest way to manifest cash in the real estate business is through a mortgage refinance of property that can take advantage of attractive rates and leveraging of home equity.

Home refinance for a golden opportunity

Many homeowners used adjustable-rate mortgages or interest-only loans to buy into the last real estate bull market. Now they face substantial increases in their monthly payments. At the same time, the value of their homes has plummeted. They’re stuck between a rock and a hard place, and many are defaulting on their mortgages. Their bursting bubble represents a golden opportunity for foreclosure buyers; but it’s impossible to capitalize on bargain basement prices unless you have a source of funds.

Refinancing can free up cash and put it to work at times like these, for high yield returns. Even those with no professional experience with real estate investment can tap the equity in their homes through mortgage refinancing or second mortgages. Then, they can buy houses that others are frantic to sell, reaping the rewards of low prices and built-in equity. Such investments can pay off in another contrarian way – as leased property – because the demand for rentals increases during hot foreclosure markets.

Eventually, we’ll enter another economic cycle, and a fresh bull market in real estate will ensue. Those who enjoy making money by taking the path less traveled will sell some of their holdings, convert a portion of their real estate portfolio into cash for a significant profit, pay off their second mortgage, and giggle all the way to the bank.

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2 Responses to “Rare Buying Opportunity for Real Estate Investors”

  1. shadox |  Apr 14, 2007 at 12:17 am

    I agree with the principal of buying when the market is going down, however, if the rationale holds true, you should probably try to buy as close to the bottom as possible.

    Unfortunately for the real estate market, the bottom at this point appears FAAAAAAR away. I am guessing we will not reach bottom (in real prices – taking inflation into account) for at least two years.