Still, rising interest
rates and falling prices mean an investor is more likely
to find less-expensive properties, Weiss says, adding
that following the fundamentals of real estate helps
The value line
Seeking value properties is one of those fundamentals.
"If you're new to the market, you have to spend
a little bit of time, three to six months and maybe
a year, shopping for something that's of value,"
Weiss says. Not quite the hit-while-it's-hot mentality
that many investors tend to have in a booming market.
After all, "buy and hold" might
be the right idea at a time where the market appears
to be cooling off.
"Real estate makes a great investment
for the long term," Moren says, pointing out that
many people will invest in this area as retirement income.
Although, with a typical real-estate cycle
lasting five to seven years, Worzala says, planning
to hold a property for two to five years will likely
be long enough to make it into the next cycle. That
is, of course, if you don't buy in at the start. McClain
says "Timing the Real Estate Market" by Robert
Campbell can help in reading market cycles.
Finding the right location is crucial
to spotting a value, as well. While areas such as Las
Vegas and Phoenix have been hot for a while and the
market's entry point may be too high for the average
individual, other areas of the country have experienced
stable growth, McClain says. "I think you're going
to see the slow and steady growth in the markets that
have been pretty much unchanged, even with the so-called
Getting down to the micro level of location
is important, too. For example, says Worzala, "it's
not what's happening in San Diego as a county but what's
happening in XYZ neighborhood." As a generally
safe bet for novices, she suggests buying an investment
property that comes with a captive audience, such as
something near a university campus.
Sellers in the hurry
Often lurking near real estate values is a motivated
seller -- someone who needs to dispose of property.
Divorcing couples and estate heirs are examples.
Realtors can sometimes assist in the hunt for these
sellers. Depending on what state laws allow, Multiple
Listings Service records may, for instance, include
phrases like "divorce direct sale" or "estate
direct sale," says Weiss. A more-direct "motivated
seller" note is another possibility.
With the U.S. divorce rate hovering near 50 percent,
he says, "you've got a huge volume of people who
need to sell to satisfy a divorce agreement." In
fact, one of his clients is currently buying a home
for two-thirds of its value because of a divorce.
"People get nutty during divorces. They're more
interested in hurting each other -- cutting off their
spouse to save their face." says John T. Reed,
publisher of the newsletter "Real
Estate Investor's Monthly" and the author of
more than 20 real-estate investment books. Not selling
the home for market price is one way of hurting the
Estates, meanwhile, often sell at good value because
heirs would rather have the money from a sale than a
property to care for.