Making Money in a Down Market

In any housing market, there are smart investments. We preview several creative ways to make money in a down market.

Purchase a rental property
Demand in rental markets has increased recently, as a result of so many foreclosed
homeowners entering the rental market. Purchasing and renting a property still is the easiest way to make money off the housing market, since the regular income acts as a buffer against difficult market conditions. Even if the home is losing value, you will continue to make a profit. Once the market turns around, you will have two revenue streams: regular rent and rapidly increasing equity.

Take over a defaulting mortgage
There still are many homeowners on the verge of foreclosure. Taking over one of these mortgages may be the investment opportunity of a lifetime. There are a variety of ways to structure such an arrangement. You may elect to allow the family to stay in the home for a period of time, particularly if it is signing over a significant
amount of equity. You also may be able to renegotiate the terms of the loan to make the investment more profitable.

Make smart upgrades to your own home
New housing construction has been affected directly by the subprime housing crisis. Construction projects are being shut down across the nation, sidelining some of the nation’s best builders and craftsmen. If you’ve held off on a home improvement project, due to scheduling or expense, now may be the time to take a second look.
You may find that the kitchen countertop that was going to cost $4,000 and take two weeks to install six months ago now can be installed for $3,000 in less than a week.

To turn the equation in your favor even more, opt for smart upgrades that help the environment and improve your home’s efficiency. For instance, insulation upgrades can save hundreds of dollars on heating every year. For a more radical approach, consider outfitting your home with some of the new and improved solar panel technology and renting power back to the local power plant. If you do it right, you can receive tax subsidies, improve your home’s value, and receive a check every month from the electric company.

Have your taxes reassessed
If there is a silver lining in the falling home prices of the last few years, it’s that lower home prices allow for lower property taxes. If you live in a neighborhood that has seen a significant reduction in home values over the past few years (in other words, if you live in the U.S.), you can ask to have your home’s value reassessed and pay taxes on the reduced value. Most counties have adjusted their taxable values to reflect the decline in prices over the last couple years, but tax assessors paint with a broad brush; if you live in an area with prices that are falling faster than the state or national average, you may be eligible for a reduced tax rate. For more information, visit theVentura County Assessor’s website or fill out the Application for Decline in Value Review

Most of us define today’s economy by its historic turbulence and depressed home values, but 50 years from now, historians likely will marvel at the remarkably low interest rates we are enjoying now. One of the simplest ways to improve your net worth is to renegotiate the terms of your loan and make them more favorable to you. You may be able to get a lower rate, a shorter term, or at the very least, a better idea of where you stand and what your options are. This strategy probably will not work for homeowners who bought or refinanced their home at the peak of the market.

Invest in services that do well in down markets
If you do not feel comfortable investing directly in the housing market, you can make money off the effects of the housing market. For instance, you could invest in stocks that generally perform well in down markets. Property management firms, companies that support do-it-yourself repairs, and companies that refurbish and/or recondition old goods and appliances usually perform well in tough housing markets.

Go garage-sale hunting
If your investment portfolio is more in the hundreds than the thousands, you still can make money off the down market. As foreclosed homeowners move into rental properties, unemployment rates rise, and renters downsize to smaller rental properties, there is a lot of great stuff that no longer has a home. Everything from flat-screen TVs to rare vinyl records are popping up at garage sales across the nation. Anyone who knows his/her way around Craigslist and has a little patience can make a quick buck acting as a middleman for these discounted goods.

Information was provided by: Wright Brothers Communications

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