“Time changes everything except something within us which is always surprised by change.” – Thomas Hardy

One of the few constants in real estate is change. Look at any half-dozen “hot” neighborhoods today, and chances are half of them were ghost towns or problem areas 10 or 20 years ago. But it’s not only the locales that change. So do the rules, especially when it comes to the money to do your deals…

Used to be you needed 20 percent down to buy a house for yourself and at least that to buy an investment property.

Now major banks will lend you 103 percent of the purchase price of your home – sometimes more. In some cases, you can even get 100 percent bank financing on small residential investment properties (one to four units) without paying loan-shark or hard-money rates.

Used to be a property had to be “seasoned” before you could do a cash-out refi. That means you had to own it for at least a year and have a good payment record before you could get a new loan that would let you cash out your down payment and perhaps other cash costs (such as closing fees and repairs).

But I just bought a property for “cash” (using a credit line) – and in just over two months, I pulled out 97 percent of the purchase price. And it was through one of the three largest banks in the country, at a very competitive rate (seven percent fixed and one point).

Used to be a bank would stop lending to you on small properties after 10 mortgages, even if you had good credit.

But, thanks to “portfolio” loans, I have over a dozen first mortgages with banks at low, fixed rates on cash-flow-positive properties. Another investor I know of at the same bank has about 45 first mortgages – all at rates far lower than he would pay with hard-money lenders or even private money.

Used to be you needed at least 25 percent down to buy a commercial property.

But I’m at contract on a commercial apartment building and just received a competitive bank quote that permits 90 percent CLTV (combined loan to value). Specifically, they can provide an 85 percent LTV (loan to value) first mortgage and allow a five percent LTV second mortgage. And I’m also looking at alternative options that might allow me to finance nearly 100 percent plus repairs, and pull all that out with a lower-rate bank refi within the year.

It ain’t your dad’s money market or real estate market anymore. In many parts of the country, it’s a brave new world where the money’s cheap and properties are ridiculously expensive.

This can create great opportunities for value-focused investors. But if you’re not disciplined and you accept floating rates and chase cash-flow-negative properties in the hopes of quick profits on a quick flip … the cheapest money in the world can end up costing you dearly.

Get Your Cash Ready

Perhaps the simplest definition of a good investor is a person who consistently makes money in up and down markets. He’s not just “a genius in a bull market.” These good investors – whether in stocks, commodities, or real estate – tend to do a few things when markets go to extremes.

First, they don’t chase hot markets. They don’t pay huge premiums to what the fundamentals support (e.g., rent and household income in the case of real estate) simply because it happens to be the “price du jour.” In hot markets, they become even more careful cherry pickers – only buying the occasional deeply underpriced deal that still makes economic sense. They also rotate their capital to value markets that show signs of being in the early stages of an upswing rather than the late stages of a market peak.

Last but not least, as the hot markets get hotter – and fuller of hot air – they get their cash ready. They know that just as markets tend to expand in the late stages of a bull market beyond what they’re worth (on the basis of fundamentals), they also tend to correct in the late stages of the ensuing bear market to prices below what they’re fundamentally worth.

That’s why these investors amass cash. So they can move in and buy cheaply in the bear market what others paid far too much for in the bull market.

I suggest you get your cash ready now.

Doesn’t Have to Be Your Cash

Even if you have poor credit and little or no cash, you can buy real estate if you learn how to find undervalued cash-flow deals. If you can’t get bank loans yet, turn to your network of private lenders and equity investors.

And if you have cash and great credit, you should still develop your network of private lenders and equity investors. They’ll make it possible for you to gradually move up on the size of your deals as you develop expertise. And they’ll enable you to act on the best deals on the market when they appear, regardless of how much of your own cash or credit you happen to have available at that moment.

There are many other ways to line up the right financing with the right deals. These include “subject-to” purchases (where you take over an existing mortgage) … owner financing (more common in commercial real estate)… bridge financing (a short-term loan, usually for the acquisition before you get the building “performing” and lock in a lower fixed rate) … home equity lines of credit … business lines … lease options … land contracts … wraparounds … and more.

But whatever your source of cash, remember that the quality of the deal comes first. In bubble markets, only buy the rare under-market deal that still cash flows. And look to roll some of the inflated equity from properties you may have in bubble markets into the emerging value markets.

When buying in the value markets, try to buy below the market average on a dollar-per-square-foot basis. Make sure you’re buying at a price that cash flows depending on how much leverage (borrowed money) you’re using. And lock in your interest rates for longer than you think you’ll own the property.

Keep your eyes on new opportunities arising in the changing money and property markets. But never forget the core principles of value investing that will work in any market.

[Ed. Note: Learn about new opportunities in the property markets, creative financing techniques, the best cities to invest in now, and more (much more!) at the 2007 Real Estate Wealth Builder’s Summit in Coral Gables , FL May 18-20.]

Justin Ford is an active investor in real estate and global stock markets. He is also a veteran financial writer. He has published, edited and written for over a dozen international investment newsletters, including launching the US version of the Fleet Street Letter, the oldest continuously published newsletter in the English Language. He is the author of Seeds of Wealth, a program for getting children to adopt good money habits from an early age. He is the editor of the Seeds of Wealth Quarterly Investment Update Bulletin. He is a contributing editor and author to a number of books on personal finance, including Michael Masterson's Automatic Wealth and Dr. Van Tharp's Safe Strategies for Financial Freedom.

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