You Can Make Money In Real Estate Too!

With all the gloomy news about housing foreclosures and the realities that we see in the neighborhoods where families are in tears while being ejected by bank authorities and the court sheriff, and with all the negative and disheartening instances about home foreclosures that we have been witness to, it is always hard to believe that one can still make big money in the real estate business in the middle of this dark episode in the real estate business.

Applicable Even To Beginners!

If you are new in this business, you tend to wonder if there is still any room to make money in the real estate business, because if the banks are foreclosing these properties that means that people, borrowers and homeowners are no longer able to pay their mortgage, an indication that people are losing their regular source of income, and if that's the case where would you get new good paying clients.

That is a very valid concern, and that was my big question too when I entered into this business back in July 1997 right during the heat of the Asian Financial Crisis that hit most Asian countries including the Philippines, where businesses, big or small, were either downsizing or closing down, hundreds of thousands lost their jobs - and lost their homes too! It was just chaotic and I was witness to it.

How I Came Into The Real Estate Business

The foreign currency exchange rate went sky high and so with interest rates that went as high as 36% annually, some banks even raised it up to 42%! That was maybe their way of saying "We don't want anybody to borrow from us anymore!" Banks were more concerned of asset liquidity and asset preservation rather than asset build up. That's the very reason why banks are fast in foreclosing mortgages.

During those days, home foreclosures were happening by the hundreds per day. The situation that I witnessed back in 1997 is almost no different from what is happening now in the United States and elsewhere around the globe where this current Global Financial Crisis have severely impacted their local economies. This Global Financial Crisis started as as a sub-prime crisis in the US in 2008 although it incubated way back in early 2007.

Seeing The Golden Opportunity In Every Crisis

But in every crisis, there is always an opportunity. Actually in Asian lingo, the local word for "crisis" is the same as the local term for "opportunity", meaning - every time there is a crisis, that is also our opportune time to rise up, grow and excel and become big, and even dominate the field. I understand those big questions in your mind, I know this idea is quite strange to non-Asians and you cannot take this fact just easily. But just follow me here and you will be thankful that I posted this on my Hub.

A great swimmer who championed the world swimming olympics was once a fearful young lad who doubted himself if he can ever swim in the pool, and I am almost sure that he had that fear of drowning on his first day of his swimming session with his trainer. The fear of drowning is what I call the crisis, but seizing that "crisis" and grabbing it by its horn is his best shot at becoming the world's swimming champion.

Or let me put it this way before we go to the opportunities of making money in real estate just the way I am doing since then. To help you gain more insights and understanding on the "Crisis = Opportunity" equation, let me relate here a true story because it is very critical that you understand this formula to get what I mean.

The True Story of An Asian Entrepreneur

And here's that true story: An Asian entrepreneur who traveled around looking for an opportunity to make money came to a big and highly populated village where looting, ransacking and other crimes were rampant and were committed day or night. Instead of packing his bags and leave that place for his personal safety, he stayed for a few days to observe what was happening and after a few days of stay, he already knew how to make lots of money there.

He observed that the local folks were in great crisis - they are afraid of these local thugs and criminals, they were living in fear of their personal safety, especially at night when these looters roam around to find new victims. So just when he understood the crisis situation, he left the village with a grin because he knew what to do next to make money there in the midst of a crisis. Crisis to the local villagers but an opportunity to him.

So he went back to the city to buy the goods he knew would sell fast and went back to the village and went to every house, greeted everybody who welcomed him and introduced himself as somebody who wants to help them feel secure especially at night and be able to get some sound sleep. This offer of help and good service got the attention and excitement of everybody. He was widely welcomed and received. So he offered them big padlocks, steel chains, security hinges, heavy-duty door locks, and heavy-duty door bolts - of all sizes and shapes! And he sold everything in 2 days because everybody needed those hardware to secure their homes especially at night.

But not everybody felt secure because there was not enough wares for everybody, so he went back to the city to buy more so he could sell more on the following day. This became his daily routine. And so long as there were crime in the streets and people feel insecure inside their homes, he will continue to have good business.

And it did not end there. Because when everybody was at peace and feeling secured at night with their locked doors and windows, he came back one day and upgraded his goods for sale by offering dynamo-operated battery-less LED flashlights and stun guns which also became an instant hit.

The Victor or The Victim Mindset

See my point? That guy made money in the midst of a crisis because he saw the golden opportunity in the middle of that crisis. Therefore, in these times of massive foreclosures and economic gloom, there is so much opportunity all around us - depending on whose perspective - from the point of view of a "victim mindset" or "victor mindset".

So at this point, which side are you in the "Crisis = Opportunity" equation. Don't stay on the left side of the equation, decide now to be on the "right" side of the equation, do not retain and dig in with that "victim mindset" because if you do, then there's no point in reading further down. But if you have decided to really see the opportunity in any crisis, then read on because this article is definitely for you.

Financial advisers and real estate advisers are not the best people to rely because their almost instant, automatic, rehashed and copied advice to you is not to dip your fingers into real estate because the market is down. You can read this chorus of similar advise in the daily broadsheets, hear them on radio interviews and see them on prime time TV news. But they are only good at giving advice but they never had any history in actually dealing in real estate using their own money. And they don't even make written or even oral guarantees for their "advice". The fact is they are plain brokers. And they are broke.

The key in making money is to understand your market: know their needs, know exactly what they want, what are their misfortunes, what is their capacity to pay, and know exactly how you can help them. The key word there is to help them. That's the secret to make money -- long term.

These Opportunities Are All Around You

So look around your nearby towns and cities and look for residential subdivisions where rows and rows and even whole blocks of residential units were foreclosed by the banks, where most housing units are left rotting at the mercy of the elements, where grass have grown tall unattended because these are your indicators that those banks which foreclosed these units are also in crisis because they have no idea how to dispose them, while a lot of families are out there needing for shelter that they can afford.

So pack your bag and go around towns and cities, scout for the worst-looking, seemingly-abandoned housing units, get the name of the bank that foreclosed them and call them on the phone. But do not forget to take pictures of the properties, take zoomed-in pictures of those portions of the house that are damaged, soiled and dirty, and also its messy lawn. Highlight those portions of the house that are in disorder, disarray and chaotic. Then put a price tag or estimated cost to bring the property to its old glory. With these valuable information which can be your tool, go and visit the bank that foreclosed these properties and offer to take them at your own price.

Since the time the sub-prime mortgage crisis started and exploded into global crisis proportion, the house mortgage price have gone down from 30% to as low as 50% of the original price. That means that you get to have at least 30% - 50% discount already from its original sale price without any effort of negotiating. Then deduct your estimated cost of repairs, repainting and restoration from the already-discounted sale price and you will most probably arrive at an additional 15% - 20% off the price if you get the properties on an "As Is - Where Is" basis. So practically your total discount should be roughly between 45% - 65%, As Is - Where Is. That's a lot of savings for you.

Once you are done negotiating the final sale price, then apply to take a loan for the property and offer to pay 10% down payment over 6 - 12 months equal payments without interest. This offer is favorable to the banks because when they factor in the depreciation cost and the cost of repairs they will still end up with almost the same values. And besides, banks are more interested in liquidating these assets without need for an additional cash expense on their part - and that is exactly what you offer them.

Be The White Knight

These banks are in crisis because they are left with hard, fixed, non-productive and depreciating assets with no takers! And here you are like a white knight to them! - offering them to take their assets as-is and take a loan for it, that's double favor to them.

Because of your huge discount, you can now offer the house for sale under "IN-HOUSE Financing scheme" where you get to receive more than enough to cover your monthly amortization. And because of the huge discount you got, the amortization becomes more affordable to your buyers by half the amount that they used to pay. This offer is definitely very attractive to your clients because always remember that because of the massive foreclosures, many families are also in dire need for a decent yet affordable housing units in every town and city.

Make Big Money In Real Estate When The Market Is Down or Up - It Doesn't Matter

This is exactly what I do in making money in the real estate business even when the real estate market is down. On weekends I usually drive around several subdivisions to spot for bank-foreclosed houses. My being an engineer-architect is a big advantage because in a glance I can already figure out what to do with the property and how much will it cost me to renovate the house.

Foreclosed and abandoned houses with dilapidated roof or walls with broken windows are my favorite finds, interesting? Right. Because that means that what I will be buying is just the lot although I can still make use of the structure by renovating them. So I buy them in cash at a deeply discounted price, do some renovations and sell them like brand new, and make big money out of it.

In cases where the lot and the house floor area is quite big, I usually subdivide the big lot into two lots with individual titles and convert the big house into a duplex house that looks very much like a single, big and beautiful house, because by doing so it becomes more attractive and yet very affordable to the market rather than selling a big one whole mansion which might take a year to sell, or even longer which will expose you to some added costs like repainting and lawn maintenance, security and fire insurance costs, and property taxes. The longer it takes you to sell, the costly it becomes for you.

By doing this for many years, I have already developed an keen eye in spotting for potential properties that I can buy low, improve and sell at a premium price. Look for similar opportunities and you will definitely make big money in the real estate business even if the real estate market is up or down. because after all, whatever is the market situation, there will always be people and families who will need for a decent but affordable housing for them.

It's your turn to spot those gold nuggets encrusted with dark mud. They are just around the corner. Grab them and make money in real estate.