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Navigate the Shifting Sub Prime Market with Commercial and Residential Real Estate Investment

Navigate the Shifting Sub Prime Market with Commercial and Residential Real Estate Investment

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By Elaine VonCannon, ABR, SRES, Associate Broker, Notary, Team Leader, Property Manager, Award Winning Agent

In my market trends article, "Real Estate Market Trends: Understanding the Sub-Prime Market Changes", published in the March/April newsletter featured on my web site http://www.voncannonrealestate.com, I explored the current sub prime market changes. I wrote of how David Lereah, chief economist for the National Association of REALTORS believes that sub-prime lending problems may build and inhibit future housing activity, but will be contained and leave the prime mortgage market unaffected. In Virginia, the economy continues to grow despite concerns about increasing numbers of foreclosures across the nation in the sub prime mortgage market and some experts claim this shift will be positive, leaving the prime mortgage market in tact. Whether you are located in Virginia or other states, navigating the sub prime market while the real estate waters are choppy is tricky. You must learn how to invest wisely and hire an experienced, trustworthy real estate professional to assist with the ins and outs of commercial or residential real estate investments.

Residential Real Estate Investing: A Strategy for Success

As the number of potential homebuyers drops due to stricter sub prime mortgage lending requirements, residential investors have a unique opportunity. There are only a small number of mortgage lenders offering sub prime mortgages now. This leaves homebuyers dealing with credit issues out in the cold when it comes to purchasing a home or property. People with credit issues, some who need to spend a year or more building and repairing their credit before they buy, are now creating an exciting residential rental market. Additionally, in a May 16, 2007 article in The Examiner entitled "Regional Foreclosures Highest in the Nation: Subprime Market to Blame" writer David Francis discusses the rising foreclosure rate in Virginia. "Foreclosures increased by 18% in Maryland and 17% in Virginia, the second and third-largest national increases," Francis writes. "Experts said the dramatic increase in the number of regional foreclosures is a fallout from the subprime lending market. These loans-given to people with limited or less than stellar credit history-have been extremely popular in the region in recent years as buyers attempted to cash in on soaring housing prices," he continues. As these homeowners experience foreclosure they again become part of the rental market. Other factors also affect the Tidewater and Hampton Roads region. The number of military families stationed temporarily on local bases affects the rental market even more now that the real estate market has slowed. Military families relocating to the area are generally stationed for only 3-5 years, which is not enough time to purchase a property and sell it for a profit.

Building Wealth for Retirement with Commercial Real Estate Investment

Another incredible strategy for dealing with the sub prime market changes is to investigate the benefits of commercial real estate investment. These investments are not just to create residual income from rentals but they can also be used as 1031 Tax Exchanges and generate investment success. To learn more about using a 1031 Tax Exchange to plan for retirement visit my web site and read "Buy Now, Retire Later: An Investment In Your Dreams". Land, commercial property and residential property all qualify under the IRS 1031 laws and commercial real estate investments are a great way to build wealth quickly and solidly. Another way to build your wealth, as well as planning for retirement, is to put your investment properties into retirement accounts. According to John Starke, real estate broker and investment specialist with RE/MAX Capital in Williamsburg, "you can use real estate in a variety of IRA's including a SEP or traditional IRA. Different types of real estate trusts have also been successful over the last twenty years." Starke recommends that investors interested in funding their retirement with real estate meet with an investment custodian that specializes in using real estate for retirement.

One such company, Sterling Trust in Waco, Texas explains on their web site http://www.sterling-trust.com that a Roth IRA, traditional IRA or single-participant 401(k) can be used to purchase real estate, however, it is essential that you understand the tax laws clearly. While real estate is held in a retirement account it must be used for investment purposes only and cannot be used by disqualified parties for personal benefit, usually this refers to yourself and family members. Some perks of hiring an investment custodian is that they can handle all manner of payments on your investment property including homeowners' association fees, utility bills and taxes. For more information on residential and commercial real estate investment, the sub prime market trends or real estate in the Williamsburg and Tidewater areas visit http://ww.voncannonrealestate.com.