An article was published today by CNNMoney.com stating that more than 20 million American's (20% of all U.S. homeowners) owe more on their mortgages than their homes are worth. I'm writiting this post in Las Vegas, one of the worst-hit cities in the nation in terms of falling home values. Vegas saw an unbelievable amount of residential development over the last decade. I recall a friend telling me (in maybe mid-2005) how more than 5,000 new families were moving to Las Vegas each month. He was investing in some of this development and I think he made a small fortune doing so. Today Vegas is in a different situation. I drove past a sign yesterday from DR Horton claiming great deals are available in any of "our 30 Las Vegas area communities." 30 COMMUNITIES! Land is so abundant here that many developers must have thought there would be no end to the number of new neighborhoods they could build. Here suburbia stretches as far as the eye can see...literally. My sister lives here with her family and she told that many of her friends purchased their homes in 2007 for around $400,000 and today their homes are worth - at most - $200,000. That's a frightening reality that many people in America are facing. The idea of giving your home back to the bank used to be something discussed in hushed tones. It was embarassing. A shameful scar on your reputation. Not anymore. Now it's becoming commonplace and nothing to be ashamed of. Others are hunkering down, working hard to earn a steady paycheck, and hope that in 7-10 years their homes' value will recover to the level of their mortgage.

There's no doubt these are scary times. But there is opportunity in chaos. I consider myself to be a contrarian. When others are selling, I'm buying. And although it's certainly no secret that there are deals to be had for the buyer in today's market, I think that now is the best time to find a way - somehow - to become a buyer. If you want to move up into a larger/nicer home, now is your chance. Consider renting your current home. Take the risk to move out, rent somewhere, and find a renter. Once you've found a renter and have a rental agreement, buy a foreclosure or short sell. Many banks will treat your rental income as income so you can qualify for another mortgage. You may be able to get a considerable upgrade to your own home without increasing your monthly payment. And in a few years, when the market recovers (and it will recover), you can sell your current home. You could even rent out your house as a lease-to-own. Not only do you help someone become a homeowner, but you were able to upgrade during an economic downturn - with an incredible interest rate to boot!

The same rules apply for investors - or would-be investors. If you're afraid of the stock market and need a place for your retirement savings, consider real estate. A few advantages to investing in real estate right now:

  • Unlike equities, they are unlikely to ever fall to zero.
  • You're buying at some of the lowest pricing in decades.
  • You can buy foreclosures from a bank that needs to unload real estate assets from off their books. Banks don't want to own real estate. And although in recent years many banks tried to squeeze every last dollar of value out of foreclosed properties, today most banks have far too much inventory than they know what to do with. Many investors are buying bank owned properties for 50 cents on the dollar.
  • Long-term appreciation.
  • Income potential if it's an income producing property (residential or commercial rental)
  • Tax advantages. Too numerous to list.
  • The ability to purchase and own real estate investments with your IRA or 401(k) savings. Contact me for more information about this unique strategy.

These are scary times, but there are an abundance of opportunities for those willing to figure out how to capitalize on the chaos.