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If home values are dropping in your market you can still do Lease Options and make money.  Cash flow and long option periods in this type of market is key.  You must make sure your deals cash flow as this will be an important source for your profits.  Negotiate for longer option periods in this type of market to make sure you have time to get your tenant buyers to close and have time to find alternates if the first tenant buyers don’t exercise the option to purchase. 

And as always, you need to make sure the numbers work even with the value of the home declining. 

For more information on calculating the profitability of a deal see Chapter 5 of my book “Investing in Real Estate with Lease Options and Subject-To Deals.”

Last week I mentioned the importance of cash flow and long option periods, which are critical to successful investing in declining markets.  The other critical component is how you acquire the property.  Declining markets are full of opportunities but you should be focused on Lease Options, not Lease Purchases.  The reason for that is that you need to give yourself an out in the event the market declines further than you anticipated and makes your deal sour.  Declining markets are a time when you want to minimize your ownership obligations. 

For more information on determining what type of technique to use when acquiring investments see Chapter 4 of my book “Investing in Real Estate with Lease Options and Subject-To Deals.”

When tailoring your investment strategy for a flat market it’s a good idea to give yourself some wiggle room.  Your market may turn up, it may turn down or it may remain flat.  Since you won’t likely be able to predict which way the market will go during the term of your deals you need to make sure the deals will still be good given the worst case scenario – the market turns down.  Give yourself some leeway in your profit calculations, give yourself some extra time to complete the deal and make sure that the deal provides some monthly cash flow. 

If you make sure you have enough time and also get monthly cash flow the deal will keep putting money in your pocket even if it takes longer to complete than you planned. 

For more information on calculating the profitability of a deal see Chapter 5 of my book Investing in Real Estate with Lease Options and Subject-To Deals. 

I know not too many of us have rapidly appreciating markets right now, but these down markets won’t last forever and you’ll still need to have an investment strategy in place.

Competition gets stronger in this type of market, which makes it easier for homeowners to sell.  So you’ll need to get more creative in how you find your motivated sellers.  This is an excellent time to employ multiple marketing strategies, like letter campaigns to expired listings and burned out landlords, placing newspaper and online ads, and calling for rent ads.  Keep your marketing consistent and ongoing.  That is the key to successful marketing and being able to do the number of the deals you want. 

For more information on how to find motivated sellers see Chapter 3 of my book Investing in Real Estate with Lease Options and Subject-To Deals.

Don’t compromise your numbers to get your first deal 

I see this happen all too often with beginning investors. They are so eager to get their first deal that they lower and lower their standards after each offer that they don’t get.  Don’t let that “first deal hurdle” turn your first investment into a nightmare.  Stick to your numbers and take your time.  Remember the race to the finish line of financial freedom isn’t measured by how quickly you get your first deal but by the amount of profits you get from your deals. 

For more information on calculating the profitability of a deal see Chapter 5 of my book “Investing in Real Estate with Lease Options and Subject-To Deals.”

When you find a property that has the makings of a great Lease-Option deal but the seller isn’t motivated enough, exercise patience.  Don’t give away all kinds of concessions to try to draw them in - you’ll end up turning that sweet deal into a sour one for you.  Instead, give the seller time to become more motivated.   The longer their home sits on the market unsold the more eager and motivated most sellers become.  So exercise patience and get back to the seller in a month or two. 

For more on finding motivated sellers look in Chapter 3 of my book “Investing in Real Estate with Lease Options and Subject-To Deals.”

I decided that I would start to post a “tidbit” of the week on my blog site.   I might also post a thought, idea or concept on this site.   You will want to check it often to get new ideas.   If you want to go to my forum and post your own Q&A that is the place to do that.    This is the place where I will share with you!   You need to be on my email list to get the “tidbit” of the week emailed to you.  If you are not on my email list, sign up by getting the FREE CD on the home page of my website.  Then these tidbits will come directly to your email box.

For the first post this week, I want to state that we are in 2008 and one of the hardest real estate markets ever.  Well not really.  It is the BEST real estate market I have ever seen in 23 years of investing in real estate.  I know many real estate investors got burned with their holdings in the last several years.  I also have several properties that turned south on me.  So what do we do?  Stick our heads in the sand and never buy again because “real estate doesn’t work?” or do we figure out what does work now and get busy and do it?   I like the second approach much more.   Get out and start looking for deals.  This is the time.   I will be sharing ideas on how to do this.  

Wendy