Buying Foreclosures - Business Or Hobby

Did you know that there are 1,945,204 homes currently in the foreclosure system, and that number keeps going up? Before it is all said and done one out of eight households will end up being foreclosed. The current political administration is trying to help some of these homeowners; however, with the increase of unemployment it is expected that foreclosures will continue to rise for at least another year. History has taught us that foreclosures lag behind unemployment. Foreclosures will start to peak when unemployment drops and people are able to start paying their mortgages again. Currently unemployment is at 9.5% and expected to rise over the next several months. One of the reasons is that the auto industry is making drastic changes and companies will be closing down hundreds of dealerships. Most of these employees will have to take unemployment at least short term and could make unemployment levels historic.

With every situation there is opportunity. It is unfortunate that so many people have already or are about to lose their homes; but, right now professional real estate investors are buying up these foreclosures and making a fortune. You see ads all over the internet and several infomercials on television pitching their latest "get rich by buying foreclosures" programs. Don't get suckered in, buying foreclosures can be risky and is not a "get rich quick" option. It takes time, patience and education, but not necessarily a lot of money. There are legitimate programs that will teach you how to buy homes for under a thousand dollars of your own money and if it is your desire, make it a lucrative business. Statistics show that between 16% and 25% of internet business opportunities are fraudulent. Yet with 75% of opportunities legitimate, why do so many people feel they are scammed"? Well the truth is most people want to sit at home and work on their computers for a few hours a week and make a million dollars a year, not have a real business. A real business needs time, effort and some sort of an initial investment. First it takes at least 90 days to objectively evaluate a business or opportunity; second it takes education. Successful business owners know everything there is about the industry they are in; and third it takes a lot of work, at least initially. Did you know that the average business owner works 16 hours a day for several years before seeing any real profit?

Conclusion, buying foreclosures is a lucrative business and must be treated as such. If you aspire to make a fortune in this business, go about it the right way and work at it as a business, not a part time hobby.
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Fundamental and Technical Real Estate Analysis

There are two main schools of stock investment: fundamental analysis and technical analysis. Both of them have their merits, according to the masses, but I don't believe that technical analysis is a sound approach to stock investment.

I'll briefly explain both approaches.

Fundamental analysis deals with exactly what it sounds like: the fundamentals of the company. This means the potential investor will examine the company's track record, its financial statements, its management, its market sector, its geographic location, and all other things that make that business that business. Fundamental analyzers look at these things to arrive at a conclusion of the company; from this data, they decide whether the company is a good or a bad one and whether or not they should invest their hard-earned money into it.

Technical analysis ignores all of this. Instead, somebody using the approach of technical analysis will look at the trends in the economy, the trends in that business, and its history of trends. In short, they look at the charts of the prices of that company's stock. These charts are examined for patterns, and the technical analyst will try to predict the future price of the stock based on these patterns.

I don't know about you, but it makes a lot more sense to me to pay attention to the company itself rather than the prices of the stock. Warren Buffett, the most successful stock investor in the world, says that in the short term, the stock market functions like a voting machine, but in the long term, it functions like a weighing machine. The good companies will come out on top. So, what are you going to look at, arbitrary patterns or whether the company itself is a good or a bad one?

These two approaches can also be found in real estate; anyone in commercial property management can focus on the fundamentals or the trends. What are the fundamentals in real estate? The fundamentals consist of geographic location (proximity to highways, major cities, etc.), the school district (if the property is a home or apartment), the construction material of the home (brick, stucco, or wood), the number of bedrooms and bathrooms, whether the house has a basement or not, and many others. Or, the investor can focus on the prices of the building over the years. The prices of the property prove nothing, as the patterns are again arbitrary, and predicting the future is impossible. You may have guessed correctly, but nobody has a crystal ball. Instead, focus on the real things that make up the investment, the fundamentals.
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