Business-Minded Legal Solutions

How millionaires are preparing for a repeat of the 2009 real estate market crash

During the early years of the 2000s, the real estate market boomed. There were new office buildings, apartment buildings and houses springing up in every city, and real estate development companies saw huge growth. It seemed to some like the prosperity would never end.

Then came the infamous real estate market crash in 2009. Many construction companies, contractors, and developers went out of business, and most of those that didn’t had to downsize their labor force to remain afloat. Buildings, houses and other properties were foreclosed upon all across the country.

After these foreclosures, those with liquid assets and cash readily available were able to purchase properties for far less than the former market prices. Many suffered due to the crisis, but some walked away from it in a much better position than they were in before.

Now, with the economic conditions created by the worldwide pandemic – and the government’s response to it – we may again see a dramatic market correction. If you are a savvy investor, you can prepare to take full advantage of what may be ahead.

Those who are prepared can take advantage of the expected wave of foreclosures

In November 2020, 6.6% of all real estate loans in this country were at some stage of delinquency. That number is likely higher now due to the continued job losses facing Americans. Unless the employment market and the economy improve significantly in the coming months, a huge number of foreclosures are on the not-too-distant horizon. These foreclosures will make plenty of properties available for prepared real estate investors.

There are some unique challenges facing investors in 2021. For example, it’s very likely that demand for office buildings will be less than it has been in past years due to the new trend of letting employees work from home.

However, these elements are unlikely to last forever, and it could be a good idea for you to take advantage of this lowered use of commercial buildings to acquire investments that have potential to increase in demand and value once the market condition recovers.

Where the most foreclosures are likely to happen

Each state legislature has established different rules as to when residential foreclosure moratoriums will end. In some states, it ended back in November 2020. In other states, the moratorium will continue indefinitely, until the state legislature decides that the time is right to lift it.

The longer a moratorium lasts in a state, the higher number of foreclosures are likely to occur when that state finally lifts its moratorium. Lenders on commercial properties may foreclose when the market begins to rebound and they have potential to sell the property and recover the loan amount.

The five cities with the highest number of loans in delinquency are, in order:

  • Miami
  • New York
  • Las Vegas
  • Houston
  • Chicago

Although many of these loans are mortgages on single-family residences, they also include other potential investment opportunities, such as apartment buildings and office buildings.

If you have available liquidity, you may be able to take advantage of the coming wave of foreclosures and acquire investment properties for below market prices.