New Trends And Developments

In many cities around the country (and throughout the world), you will find it increasingly difficult to invest in single-family houses, duplexes, triplexes, and quads. In many areas, the upward jump in property prices has outpaced increases in rents. Without a large down payment, these rentals often produce negative cash flows. In addition, as some property prices climb higher and higher without a supporting base of rental revenue, they expose you to greater risk of a price "correction" (not collapse).

So if you can't (or don't want to) come up with a large down payment, feed the alligator (until rents catch up), or risk a price correction, what real estate alternatives can you pursue? As we have discussed, you might go for lease options, master leases, fix and flip, foreclosures, REOs, contract assignments, or perhaps condo conversions. Recently, though, property investors are venturing into other investment strategies that may involve one (or some combination) of the following:

♦ Lower-priced areas of the United States (and Canada)

♦ Emerging growth areas

♦ Emerging retirement areas

♦ Commercial properties (office, retail)

♦ Mobile home parks

♦ Creative financing

♦ Discounted paper

♦ Property tax liens/tax deeds

♦ Zoning changes

In covering so many types of investing in one chapter, I intend only to introduce you to these possibilities. Please do not jump into any of these investments before you've educated yourself about the pertinent market data and run some realistic numbers.

In the next section, for example, I encourage you to look at properties in lower-priced areas.

Still, do not buy simply because the asking price of a distant property sits well below (and cap rates well above) those available in your area. A $200,000 quad in Peoria might look like a steal relative to La Jolla. Yet that price of $200K could tower above the comparable properties available in the Peoria market. It's underpriced relative to La Jolla but still overpriced relative to Peoria. Before you buy, understand the pricing of the local market.

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