If you believe in the investment philosophy "buy low and sell high,†then you're probably already starting to wonder if now is the right time to begin buying real estate. The market is flush with foreclosures (homes that have already "gone back†to the bank/lender) and short sales (those ripe for negotiation with lenders that have yet to "take back†the homes through the foreclosure process), both of which present good opportunities for investors looking for a beneficial place to put their money. A record 12% of all U.S. mortgages were at least one payment behind — or already in the foreclosure process — during the first quarter of 2009, according to the Federal Housing Finance Agency. During the same period, property values declined to their lowest point in years, with the average price of a U.S. home falling 7.1%. Add in mortgage interest rates that are hovering around a low 5% and the fact that many investors have become disenchanted with the stock market, and it's clear to see that now could be a good time to get into real estate. "Because so few homes are selling right now, in some cases property can be picked up for less than 30 cents on the dollar (compared to the previous sales price),†says Michelle Francis, a Realtor with Tim Francis Realty in Atlanta. Compelling as they may sound, such deals can present unique challenges for the investor. Francis recommends steering clear of geographic areas fraught with foreclosures. "If you look down the street and half of the homes are in foreclosure, it's probably not a good place to buy,†she cautions. In Atlanta, for example, Francis says investors should stay away from the condo and townhome market, both of which were overbuilt during the housing boom. "It will be a long time before those markets recover,†she says, noting that a "buy and rent†strategy (for someone looking to purchase a second home, for example) may not always work out in such cases. "Many times in these developments, rentals are only allowed for 25% of the total units. You could end up on a multiple-year waiting list before you can rent out your property.†Certified Distressed Property Expert George Durkin, broker-manager with Realty Executives of Nevada in Las Vegas, says real estate investors who do their homework — and who don't try to calculate the market by looking for the "perfect†time to buy — will have the best chance at success in today's market. Because you can't be sure of the circumstances behind the former resident's exodus, and because foreclosures and short sales are typically purchased "as is†and without warranties, Durkin says the best defense is to ask for a due diligence period of at least seven days after you make an offer. "Hire a professional home inspector, plus specialized inspectors to handle the roof, mold, pests and other inspections,†says Durkin, "and to make sure that the property doesn't require any major repairs.†The financial aspect of the "non-traditional†real estate deal can also be challenging, says Durkin, who advises buyers to work with their real estate agents to fully understand any counter-offers provided by the lenders, particularly in the case of a short sale. "Many of these contracts are worded in ways that find the buyer paying for costs (such as property transfer taxes and other fees that the seller normally covers) that may not seem obvious at first glance,†Durkin warns. "Careful attention should be paid to what closing costs are going to be paid and timelines associated with the transaction closing.†As with any type of investment, it's best to speak with a financial planner, accountant or other professional before jumping into the real estate market, particularly if this is your first time around. If you're buying distressed properties, be sure to educate yourself on the process, paying particular interest to the nuances of such sales. Go into the market with a long-term view (the days of "flipping†properties for a quick profit are a thing of the past), and your chances of success will be that much greater. 5 Tips for Real Estate Investment Success in 2009 Don't try to time the market. Forget about "flipping†properties for a quick sale, and instead take a long-term approach to the market Deal with a professional agent that knows the market and knows how to handle inspections and contract negotiations Be patient. You may have to make several offers on homes before you are successful in obtaining an acceptance. Obtain a letter from a nationally-recognized bank stating you are qualified to buy, or have proof of funds in writing if you are cash buyer Be able to act fast when it comes to being notified of a good value. Web Resources: 12 Tips for Buying a Home at Auction