Most people believe that investing in real estate during a recession is a risk that’s not worth taking. They claim that the market is too volatile, that no one is buying real estate since cash is very limited and that instead of buying houses, people opt to rent apartments since it’s a lot friendlier to their pockets and because most of them probably got foreclosed on and so on and so forth.

This is simply untrue.

You see, from the last argument alone (that people are moving to apartments and rental properties because they probably got foreclosed on), you’ll already be able to see two real estate investing opportunities – rental properties and foreclosures.

All you simply need to do is to try to look at the situation at a different perspective.

It may be true that this entails a risk that’s too high for comfort – if you’re using traditional or ‘old-school’ investing strategies.

What you need to understand is that recessionary times call for a more creative approach to real estate investing. You don’t necessarily have to abandon the business altogether. You just need to ‘shift your gears’ and approach your deals from another angle.

So what strategies DO work during a recession? Here’s a few:

Owner Financing / Subject To’s / Lease Options

A lot of homeowners who need to sell their houses find it difficult to find buyers so most of these houses are just sitting there vacant and sometimes even neglected but most of the time, these homeowners continue to make mortgage payments on them so these properties become more and more of a financial drag that they need to get immediate relief from.

Now you don’t really need to have these properties at a deep discount in order to make the deal work. As long as you can make the homeowners agree to owner finance the properties to you and so you can take the property under terms then that’s already a good deal.

For example, the property is worth $100K. You can buy it for $200K and still make money.

How do you do it?

If the owner is willing to owner-finance it to you (and most of them would be happy to do that), and you don’t have to make any mortgage payments for 30 years and after that time, you pay them $200K, do you think that will make the deal work? Of course it does! That’s because the home price will go up and you didn’t have to pay any interest and all that.

These strategies work really well right now because a lot of these homeowners really need to sell their houses fast.You just need to get these houses under flexible terms to make it work.

Wholesaling

In the present economy, this strategy is really hot. This is because you can get a house at deep discount so you can still sell it cheap and make a lot of cash.

The reason you can do this is the same as the first one, we discussed. Homeowners are really desperate to get rid of their unwanted properties right now because they have a hard time finding qualified buyers and a lot of them would settle for literally pennies on the dollar (40 to 50 cents to the dollar). All you need to do is grab these properties and flip them for a quick profit.

For example, a property with an actual value of $100K which the owner desperately needs to sell and would settle for $50K. You get the property under contract for $50K, flip it to another buyer or another investor for $60K and you pocket a quick and easy $10K.

Short Sales

Short sales work like a charm nowadays because there are so many foreclosures going on and a lot of homeowners actually owe more than the actual value of their houses (mostly because they probably got their house on 100% financing or did a cash-out refinance and now that their property value dropped, they end up owing more than what the property is worth).

With foreclosures at an all time high, banks are finding themselves with more foreclosures than they can actually handle and so they are need to move these properties real quick.

That’s where short sales come in.

In a nutshell, what you do in a short sale is to negotiate with the bank to accept payment on a property that is lower than what is owed on it or even lower than its actual value. Banks are very willing to do this since they’re not in the business of owning homes. Simply put, they’d rather take a short sales offer on a home and make some money than to be stuck with a bunch of properties they don’t need and want.

Indeed, as a real estate investor, there are a lot of alternative ways of approaching deals in the present economic situation that will still prove to be profitable for you.

You don’t have to listen to all those doomsday-mongers who keep screaming that the world is coming to an end.

Well is you go ahead and believe them and abandon your real estate investing business, that may exactly be what will happen to you.

It’s true that the times are difficult, but that does not mean all hope is lost. You just have to look at the situation from another angle and take it from there.

Remember, “Extraordinary times call for extraordinary actions.”

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