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Great investment property deals in short supply
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However, Koehler says with all of California having pricey real estate, he didn't have much of a choice but to get into the market.

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"The market is quite high and the rental market is quite soft," Koehler says. "The appreciation on real estate in the last three to five years is in the double digits."

Since real estate has been so tempting, more renters flocked to becoming homeowners, eroding the tenant pool, he says.

Koehler is counting on the house appreciating and area rents rising. "I'm willing to be patient," he says.

Karen Peninger, a real estate agent with F.C. Tucker/Emge Realtors, based in Newburgh, Ind., who also owns investment property, says there are still deals in the Midwest.

"We get a lot of transient people in this area, and when they come from New York, New Jersey or Pennsylvania, they're able to buy more for their money,'' she says.

People realize that real estate is a good way to invest, says Peninger, who has been a real estate agent for three years and has worked with her husband's building company Homes by John Peninger since 1980.

Brucetta Williams, who owns a four-unit building in Washington, D.C., and a single-family rental in Baltimore, is currently searching for a deal.

Williams is looking for another house to keep as a rental, and she has walked away from deals where she couldn't make a profit.

"I don't want to overpay. I'm looking for a deal and there are very few out there," she says.

In this market, finding a deal requires hard work and a lot of times, a connection -- such as a neighbor who will advise you of a potential sale, Williams says.

"That's the only way to find things priced appropriately. There is a certain amount of overpricing," Williams says. She refuses to get caught up in the market frenzy that has overconfident sellers believing they can "put anything on the market at any price."

Don't buy at top of market
"You just have to be careful," Williams says. "Make sure you're not buying at the top of the market."

But, Williams sees good news in the real estate market now.

"The prices are leveling off. They're not spiking as much as they were over the past couple of years," she says. "There are a lot of 'reduced' signs."

Compared to the housing market a few years back, Williams says the current market is like "night and day."

"When I bought my first house in 1998, it was very much affordable for me," she says. "Now if you look at anything under $250,000, you find only one-bedrooms in neighborhoods you hope will change."

Bankrate.com's corrections policy -- Posted: May 18, 2006
 
 
More stories by Otesa Middleton Miles
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