BANK OF AMERICA INCREASES PACE OF FORECLOSURE FILINGS..PRE-FORECLOSURE NOTICES UP IN AUGUST.......THE BUBBLE BURST....... HOW CAN WE TURN THE REAL ESTATE MARKET AROUND?

Those who read this blog know that I am an avid advocate for real estate investing and that I believe that left to its own device the real estate market will correct itself through American ingenuity and capitalism. But with all of the bad news floating about, and a new surge in Bank of America's preforeclosure filings, I feel compelled to say a few more words about my philosophy and opinion of the way forward out of this real estate crisis.

Four years ago I accurately predicted that the real estate bubble would burst, and that the market was going to experience years of price contraction and stagnation. The major banks and many others bet that through government supports and market manipulation that the crisis was temporary, and that after a short dislocation, prices would level off and the market begin to function again. That logic caused lenders to at first foreclose on a huge number of homes, and then hold those properties in inventory waiting for better days to return. How wrong were they!

Now companies such as GMAC now known as ALLY privately predict that the real estate market will not stabilize and function normally until 2012.Over the last two years I have come to the conclusion that unless the Federal Government and Federal Reserve stop intruding in the market that dysfunction may be normalcy. What does that mean to real estate investors and developers? It is my opinion that the focus of investors in this market should be on acquiring wholesale properties that need rehabilitation and also pre-foreclosure and foreclosure properties that require rehabilitation.

Where should you buy these properties? It is important to survey your market and acquire properties only in areas, or zip codes, were sales are still occurring. Areas around colleges, employment centers, transportation hubs and shopping districts, are more desirable, as students need a place to live, employees want to live closer to their work and public transportation is becoming more critical.

We focus are attention on up and coming neighborhoods, targeting more functionally obsolescent properties. This keeps our acquisition cost down, and allows us to concentrate more of our capital on the rehabilitation of the property. Those properties usually have a much greater return on investment, as the final product has a much higher value.

I believe that if Fannie Mae and Freddie Mac would get out of the real estate business, private investment and prudent lending, would right the market faster and more efficiently. But, in the meantime an investor  should look for obsolescent properties in good neighborhoods and rehabilitate them and they will get a very nice return on their investment.