The world of real estate has pretty much stayed the same for decades. It’s no different today than it was 50 years ago. The basic principles will never change. Is this true? Only part of it? Well, lets look at what is different in the real estate world. Also, lets see what is the same.
Because of the unbelievable appreciation of land in recent years the real estate industry has grabbed the attention of Americans and also the world ( investment opportunities are worldwide) like it hasn’t done for a long time. There were certainly periods in the USA’s history where people were absolutely overtaken with the idea of making money from and possessing real estate.
Take the decades in the 1800s as an example when people risked their lives to go west. The risks were amazing but the idea of a better life and of having their own land made it worthwhile. This is certainly a situation that could be described as being one that hasn’t changed much because people are still looking at real estate investments, land development, land deals, building homes, acquiring land, and just looking for a better life. That will never change I believe even if some day, hundreds of years from now it means buying land on space cities and maybe even the moon. Heck, I don’t think the idea of buying condos in space is really that far away actually. It will happen. ( Ok! This example can be described as a BIG difference. )
Then again citing the 1800s people can also say things are dramatically different now than they were 175 years ago. The price for one. Remember the Louisiana Purchase? I think the US bought about ½ the states for the price of a pickup truck now days. Or in a more recent example, how about our purchase of Alaska from Russia? Another good speculative real estate deal for the US. Sorry to all the Russian and French readers out there. One thing the US has always seemed to be pretty good at is acquiring land at a good price. We haven’t done that in a while though and I won’t get into the reasons why not, as that would make this article an e-book for sure. Oh yes, the Manhattan deal was a good one for the USA also. We won’t go into the political discussions of what happened to the Native Americans here either.
So what is really new now? How about creative financing? This has been a big change in the last twenty years or so. It’s all about getting more people able to buy homes. This helps the whole real estate industry as a whole. Not just the lower income levels who are able to buy the more expensive homes now days, but also the rich people as a kind of reverse “trickle down" theory.
I will name this my trickle up theory. The original trickle down theory, which I was never a big believer in by the way, was about cutting taxes for the rich and making things easier for them in a business sense and then the money will trickle down to the middle and lower classes because the rich will be spending more money, thus creating more jobs and more wealth for the lower classes.
This doesn’t really work as well as some think in my opinion because the wealthy many times just keep their money in investments which don’t trickle down as much. They trickle down but a portfolio of millions or billions doesn’t really create as many jobs as would be created if all that money was in the hands of middle class workers where it would be put right back into the economy. But when lower income people can buy homes it certainly helps upper class investors because this creates more demand and with less supply the prices go up for everyone.
Something else that is new and getting more and more common is interest only mortgages.
This also allows more people to get into the home buying market. Some believe the interest only mortgages will be a bad thing that will help burst the current so called housing bubble or real estate bubble. That is yet to be seen, but what is clear is that these creative financing solutions are helping thousands buy their homes. The interest only loans are also helping the real estate investors quite a bit, especially those who are looking to buy, repair and sell. Or those who are looking to buy a piece of land, build on it and flip it ( sell it ). These people like the no interest loans because they don’t really care about paying down the principal.
The wrap around mortgage is a mortgage that isn’t new. It has been around for a while but after losing popularity in the 70s it may be making a come back. Check out this link that describes it in more detail and has an e-book that goes into greater detail about the “wraparound mortgage"; The Secrets of the Little Known Wraparound Mortgages. http://www.automateyourwebsite.com/app/?af=268818&u=http://www.cashflowinstitute.com/wrap.htm
Here’s another very popular newer type of loan, the non-income verification loans, also known as NIV loans and stated income loans. This has also been a part of the creative financing process of finding ways to get more people into loans. Actually it just shows that banks and mortgage companies have lowered the qualifications and standards to buy a home. That is a good thing as far as I am concerned. The rich may be getting richer but at least the poor have a better chance of owning a home. The middle class also. Statistics show that the home owners percentage is at an all time high in most areas. This has a lot to do with these ideas such as the “stated income" or ‘niv loans’. Here is an article about the ‘NIV loan; http://www.cutting-edge-real-estate.com/nivloans.htm
The real estate industry is the best industry in the world I believe but first make sure you look at as much information as you can find before investing. Well, to a certain extent anyways. Don’t wait too long. At some point you need to take action whether it is buying your first home, second home, investment home or a development. Don’t be one of those who says “ I wish I had bought a house way back when. "
Tim Phelan is a full time internet marketer who has been self employed for the last 12 years. Real estate, the environment, art, world culture, politics are some of his other interests. Visit this site for some info on two of these interests: http://www.cutting-edge-real-estate.com
Copyright Tim Phelan 2005
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