Opportunities to buy property at bargain basement prices do currently exist for savvy real estate investors looking for long-term security and financial gain. The ongoing instability in the financial, housing and mortgage markets has created buying opportunities for real estate speculators in several select urban locations in states such as Florida, Michigan and California. Several areas have been slammed by falling home prices so severely that bargains now exist for those with good credit or the cash on hand to spare for long-term investments. In some inner city California neighborhoods the market pendulum may now be swinging into a zone where prices are lower than a stable market would support, overshooting some property prices on the low end. This is because the home price bubble, which supported overvalued home pricing in California and elsewhere for roughly from 1999 to 2008, has burst. Many distressed sellers are now being forced to surrender their properties for prices that may well be significantly lower than what would normally be considered a reasonable value.
Where can you find these low priced investment properties? This article will focus on these types of properties in the San Francisco Bay Area. Many of the homes for sale I am focusing on may not be exactly where you want to live each day, but they are most certainly a good place for you to consider investing for generating rental income today, and for achieving major price appreciation in the future. There are crime, pollution, and quality of life issues to consider in many of these areas. But when balancing these highly leveraged real estate investments against the current stock, gold, commodity, and/or currency speculation markets, investing in inner city real estate in certain California cities becomes a very attractive long term capital investment strategy which promises a higher rate of return then other common investment tracks. Real estate, which stays put no matter what the economic situation of the nation, can be a good place to park savings and retirement money.
Urban areas in several California cities are a good place to start looking for values. Want to buy a detached 2-bedroom house in the San Francisco Bay Area for under $100,000? How about $80,000? There are many properties currently offered in that price range and lower in Oakland, California. Just two years ago it was hard to find any Oakland homes for sale for under $350,000, and prices of $500,000 and up for condos and detached houses in the inner city neighborhoods of Oakland were common. During the real estate boom investors flooded Oakland with real estate investment dollars, betting that the strong Bay Area economy, the ongoing gentrification of Oakland, and the unbeatable California weather would secure the success of their investment.
But there was a catch, of course, as many of those who bet that real estate would continue its meteoric rise in value immediately and forever were blinded by greed and overwhelming ambition. Many overreached with unsustainable no down payment and/or variable rate loans that were eventually beyond their ability to service and pay. It soon became clear to potential home buyers, both in the U.S. and internationally, that average U.S. incomes and housing inventory levels could not support the values of the overpriced real estate that had already been ‘bought’ from and ‘securitized’ by the banks. The same banks that originated and funded the speculative loans throughout the bubble years, while simultaneously doling out massive campaign contributions to their ‘representatives’ in Washington D.C., were confident that they would be supported and ‘rescued’ by the U.S. government in the case of a crisis. These banks ultimately responded to a declining housing and mortgage market by tightening loan underwriting standards and thereby greatly diminishing the ability of many buyers to enter the market.
This phenomenon, which has been labeled the credit crunch by the media, battered the bubble price investor’s real estate holdings by initiating massive price declines. Many overextended real estate investors, finding themselves overwhelmed by the dictates of the marketplace, have now been foreclosed upon, or have just walked away from their mortgages. Those who could afford to hang on hoping for home price appreciation, or those who bought during the boom and now need to sell for other reasons such as true hardship, face a market where they must accept prices significantly lower then what they originally paid, or watch their properties languish on the market with no buyer interest.
Consider the case of 1966 84th Avenue in Oakland, California. Its current asking price is $69,000, and it has sat on the market around 77 days. In 2005 this same home sold for $355,500. It is in a ‘high risk’ area with major urban problems like crime and a declining infrastructure. But the 20% down payment on this property is only $13,800, and after figuring in taxes and insurance, the monthly mortgage payment would be a paltry $376 a month on a 30 year mortgage with a 5% interest rate. This house could be rented for at least $1500, and probably much more, especially to section 8 tenants or people who receive other government subsidies for rent and living expenses.
Consider further that over the next several years government sponsored social welfare and bank rescue programs will almost certainly proliferate that intend to help ‘at risk’ and ‘under-represented’ home buyers buy homes in areas like inner city Oakland, providing subsidized down payments and other types of financial assistance to would be inner city homebuyers. These types of programs are already underway or are being introduced in cities throughout California and Michigan, and in other distressed areas. These government social programs, if instituted on a massive scale, will probably inflate the value of inner city California real estate above current levels. Add in the overall relative size and strength of the Bay Area and the California economy, and that perfect California weather once again, and investing in inner city California real estate becomes practically irresistible for well to do investors seeking long-term security and gains. This is especially true in light of the material value of an investment such as real estate, which cannot simply disappear into the wind, (or a Madoff style secret account), as can investments in vehicles such as stocks, bonds, and currency.
But Oakland isn’t the only California city that currently has an exciting urban real estate investment environment. Similar opportunities exist in the immediate San Francisco Bay Area in the cities of Richmond, Hayward, San Leandro and Vallejo among others. The detached single family home located at 1410 Hellings in Richmond, CA is currently offered for $99,000 and sold for $430,000 in 2005 and $108,000 in 1989. A two bedroom detached home at 829 Modoc Street in Vallejo, CA that sold for $255,000 in 2004 and $110,000 in 1995 is currently offered for $65,000 and has been on the market for around 189 days. A 3-bedroom house which is currently occupied by tenants at 15924 Wagner Street in San Lorenzo, CA is now listed for $75,555. In October of 2005 this same San Lorenzo home sold for $535,000, in June of 2007 it sold for $455,892.
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