St George, Utah Real Estate Blog

09/07/05

Today’s real estate numbers:

• All homes for sale on the MLS: 592
• Homes pending (under contract): 866
• Median asking price: $379,900
• Average mortgage rate: 5.23%

Answers to VIQ’s (Very Important Questions!)

·         Q. How do you buy a home for less than a foreclosure?
A. In a hot market like we have now nearly all bank-owned (foreclosures) homes are priced at or above market. Banks know what’s going on in a market and will price just like a regular seller will, even over-pricing in most cases. The best way to find a great, below market, home is to work with an experienced agent who is will to find you a property that matches your criteria. The second best way is to keep current on the new real estate classified ads in the paper.

·         Q. How do you work with renters without losing your shirt or your cool?
A. The easiest way to crash and burn as a new investor is to try to manage your own rentals without the knowledge you need to run your new business. Because that’s really what it is, a business. A business that is way harder than you think. Would you consider starting a retail business without any knowledge about the retail business?  That would be a quick route to bankruptcy. The same holds true with managing your own rentals. If you don’t have the time or desire to read / educate yourself, you should hire a property management company. Period.

·         Q. How do you make money investing in real estate, no matter what the market does?
A. Buy and hold. Real estate investing is very forgiving, given enough time. You can buy at the very top of a hot market, have the market tank the next day, and still make a fortune if you hold onto the rental long enough. For example at the top of the last hot St George market, about 1995, you would have paid about $100,000 for a 3-bed, 2-bath, 2-car garage rental home in the Red Cliffs area. A couple of years later you would have been lucky to sell that home for $95,000. But fast forward to 2005, and that rental home is now worth at least $230,000. Buy and Hold for a very low risk investment.

·         Q. The market will slow down eventually. What do I do then if I still want to invest in real estate?
A. A slow market is a wonderful time to invest. This is called contrarian investing, buy real estate when everyone else wants to sell. Homes priced 20% and more below market can be found. (I could tell you some amazing stories about this!) Seller financing, lease options, mortgage wraps can all be found for the investor that looks around. How about fixer-uppers? In June 2003 I listed a 3-bed, 2-bath bank-owned fixer in a nice neighborhood that eventually sold, as is, for $82,000. This home needed about $15,000 in repairs. It was fixed up and sold for $120,000, then sold again a year later for $144,000. I’ll let you do the math. This is just one of many, many examples of what to do in a slow market.

Written by Don Glasgow, All copyrights reserved, 2005