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The changing market

 

The real estate "boom" is over, experts say. With change comes both risk and opportunity.

Investing strategies in a changing market

These days, you don't even have to venture off the couch to be enticed into investing in real estate.

Whether it's a fabulous success story on TV's "Flip That House," blue-sky testimonials on some infomercial or your cousin phoning to brag about her latest score, someone always made a fortune without plunking down a red cent -- unless, of course, you count the cold cash paid to learn "the secret."

But "follow the herd" isn't necessarily the best move for a real estate investor, says Elaine Worzala, professor of real estate at the University of San Diego's Burnham-Moores Center for Real Estate. "Just because your cousin's [investing] in a particular area doesn't mean you need to."

What about when it's not only your cousin but your cousin's cousin? At last count, The National Real Estate Investors Association, or REIA, had more than 37,000 members across the U.S., in at least 271 local associations and investment clubs. In the boom market of the past few years, the association experienced a huge jump in members, says Rebecca McClain, executive director of REIA.

REIA groups provide an overview of the business and give members a chance to learn from one another. "The education you get from the front of the room is important, but the education you get from the guy sitting next to you is more important -- because he will tell you his horror stories," McClain says.

As the market apparently does a flip, with higher interest rates, lower prices and longer stretches of time between "list" and "sell," a greater majority of those who have joined the real estate party line may well be in for a scare. "We happened to have a nice run over the last 10 years," Worzala says. "But properties go up and down -- it's a very cyclical industry."

Accordingly, real estate investment strategies are also bound to change.

Patience is a virtue
Patience in finding profit opportunities will become ever-crucial, experts say.

"The most important thing is to set a realistic goal of how you want to invest," says real estate broker Mark B. Weiss, author of five books, including "Real Estate Flipping: Grow Rich Buying and Selling Property."

Weiss compares the process of finding an investment property to a fisherman waiting for his catch. "Sometimes you put the hook in the water and that fish will bite immediately. Sometimes it takes two days," he says. "People who are impatient -- spending money on books, CDs and tapes and falling into the seduction that, 'It's so easy, everyone's doing it' -- are people who won't be successful for the most part."

Can novices make a worthwhile catch in any kind of market?

"Yes, if they know what they're doing," says Lisa Moren, author of "Real Estate Investing for the Utterly Confused," an update on a seminar course she has been teaching for years. "I believe in real estate. I've bought property when interest rates were in double digits, and I've bought when interest rates were at a 40-year low."

But novices should avoid a relatively sinking market, says Moren, also marketing director of Entrust Administration Inc., a provider of self-directed retirement plans for which plan members can invest in nontraditional assets like real estate.

"Wait until it totally tanks," she says.

-- Posted: March 1, 2006
 
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