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With land values going up, interest rates up, a lot of new product on the market to compete with, where and how do you find the real estate bargains in today's climate? It's enough to make the passionate investor go postal. Instead, Property Investor went "coastal" and met with top real estate investment agents and association professionals in the industry in some of the nation's most desirable cities to find out what's going on and where it's happening. Here are some creative tactics, tips and forecasts on where and what to buy, straight from the mouths of the pros.

SAN DIEGO 

FRANK ATRASH
INTERO REAL ESTATE

San Diego as a whole is a law unto itself in terms of real estate — and can be quite different, even from the rest of the state. There is a limited growth in supply due to limited land, with a relative higher increase in demand. People are still moving here, in the "typical" migration from the Midwest into the Sun Belt, so you cannot really use San Diego as a barometer for all of California. However, just as in the rest of the world, every city has its hot neighborhoods, and others to avoid.

In terms of finding a good "bargain," I recommend some of the neighborhoods in the central San Diego area, including Sherman Heights, Logan Heights, Clairemont and Golden Hill. What's happening in San Diego is typical of some other areas of the country, in terms of the migration to downtown neighborhoods. People are tired of the commute from the suburbs, so the areas in the central part of the city are revitalizing. That being said, there are still some nearby communities that I am sending a lot of my investors to, including National City, just south of San Diego, and Chula Vista, a bit further south of National City. Getting away from the San Diego area, I am finding some areas in south central California that are really seeing a rise in interest and availability, such as Escondido and other cities in that area.

If you want to buy apartments—four-plexes, etc.—you can really do much better if you head north out of San Diego, staying inland, along I-15. You can actually find properties at $60,000 to $80,000 per unit, whereas in San Diego, you would pay at least $110,000 per unit — even up to $200,000. If you are looking to find the "motivated" seller, have your cash ready. I believe that there will be more and more good deals coming around as people begin to get squeezed out of the market. There are not a lot of opportunities in San Diego because of the historical higher rate of appreciation — people getting into trouble will sell rather than foreclose, and are able to do so because of the equity they have from the last few years' real estate "boom."

However, the late arrivers who purchased recently, especially those who bought using variable rate loans and are expecting appreciation to go up at the same rate, may not be so fortunate, and may need to sell at a discount, in a hurry. The cash buyer, who can close quickly, will win these deals!

A person can buy income-producing real estate, which will generate $70,000 per year, hands-free, if he or she has at least million in equity. Plus, they will get new, higher levels depreciation to write off, shielding them against income taxes. And of course, property never completely loses its value. Overall, if investors want to get out of appreciating markets and into cash flow, they need to look outside of California.

SEATTLE

DUGALD ALLEN
VICE PRESIDENT OF REAL ESTATE ASSOCIATION OF PUGET SOUND

Your typical buy and hold investors are not running around downtown Seattle anymore. Investors are finding their niche outside the city. The whole coast is becoming more populated as retail prices are driven up, so your buy and hold investors tend to be following that trend. People are moving out, and when they move out their friends move with them. A lot of these people are renters. Irrespective of the market and location, there will always be opportunities for rehabbing. There are a lot houses in the area in need of work. You can still find deals, but it's a lot tougher today than it was two or three years ago. Homes are selling with multiple offers coming in and for full retail, despite the fact that they need a lot of work.

Your typical rehabber is still looking at the low-end neighborhoods because of its price point. There aren't a lot of bargain neighborhoods in downtown. To find a house at $350,000 is a steal. For rehabbing, you are looking at the $300,000 to $400,000 price range. As long as you have the financial backing, it doesn't matter where you are as long as you find something undervalued compared to the local market. In King County, the average home price is around $410,000. At that price, if you get 100 percent financing, you can expect to rent at $3,500 a month to create a positive cash flow. To make $1,500 a month, you'd have to do 50 percent financing or more. Other opportunities in the Seattle area include Arlington, Moses Lake, Yakima, Tacoma, Olympia and Bellingham. Investors are finding houses in the $100,000 range and a lot of those areas have great industry and great economic birth happening right now, so they are great places to find the buy-and-hold properties.

Rents in the Seattle area are expected to explode in the near future, some jumping nearly 50 percent. Condo conversions will remain hot, too. And if some renters are pushed out by prices, it will also benefit investors on the outskirts of the city.

GRAND RAPIDS 

TOM KOETSIER
VICE PRESIDENT OF RENTAL PROPERTY
OWNERS ASSOCIATION OF MICHIGAN

For June, the Grand Rapids Association of Realtors reported that sales were down 23 percent compared to one year ago, and listings are up 9 percent. So you can see the kind of pressure in the market. Recently, I heard someone say that there are now 10,000 houses for sale in the Grand Rapids area. It's a tremendous buyer's market, but as always, buyer beware. It is easy to buy them, but hard to sell them. Investors need to have the end game in mind and ask the right questions: Are you buying the right house? Will you be able to sell it again after you fix it up?

Investors need to be very cautious these days picking the right opportunities. I am most familiar with Grand Rapids, but I think this scenario is similar to markets across Michigan. We just don't have many good moves. It is economy related. People that have to sell are accepting lower offers than they want, especially in the under $100,000 market. The average house is on the market for nearly 100 days. It's tough for an investor, too, as he or she may end up waiting seven months to sell instead of three; that's four months of payments coming off the profits.

You don't hear as much about lofts going up downtown these days as you do condos. Even old factories are being converted into condos. More people want to move downtown. Rent rates look like they're going to be flat for the time being. Unfortunately, the market as a whole will most likely be traveling along the bottom for a while. I'm not a doomsayer, though. The market will come back.

CHICAGO 

RON WEXLER
KELLER WILLIAMS PREFERRED REALTY

The runaway inflation — particularly in downtown Chicago — has slowed, and even possibly stopped. Prices are still strong, but inventory is high, so any success now is dependent on the type of investment you want to make. For the past three or four years, you could literally stand in the front of the line of people waiting to buy into a new or converted project and then walk to the end of the line and sell it for a very decent profit. Those days are gone.

Overall, I find that people with cold, hard cash can do more in today's market climate. Condo conversions in the South Loop and Gold Coast of the downtown area have been a very big market — buying buildings, converting them to lofts and then selling them. However, the prices are not jumping as much as they were even a few months ago.

That being said, the market is still very strong outside the city. The south and southwest suburbs offer investors to get more for their money space-wise. Commercial property is still strong in suburbs like Homewood, Frankfurt, Mokena and New Lenox.

For those who want to play the appreciation game, consider the North Shore and northwest suburbs — from Evanston to Skokie along the North Shore to Lake Forest and west to Deerfield, Buffalo Grove and Long Grove. For those not comfortable with direct investments, there are also real estate investment trusts, knows as a REIT. It is like buying stock: A big company buys a lot of real estate, and you buy stock in that company. You can get a pretty good return on REITs. These companies often focus on specialized properties. Some specialize only in residential properties or maybe just office space. There are others, for example, that work specifically in bank buildings. I always mention this option for people who are risk-shy, who want more of what I call an "armchair" investment.

MIAMI 

BRITTA CHAMBERS REMAX REALTY

First of all, I believe that the more product on the market, the more negotiating room you have. The key is to sift through the inventory and find the motivated sellers. These are the ones that have already purchased a new home and need to sell their old home quickly. Or, it could be an investor who needs to sell an investment property in order to be able to acquire a larger investment property, maybe to take advantage of a good deal.

Of course, an owner facing foreclosure is usually very willing to negotiate a good deal for the seller. The point is not to take advantage of the owners in a tough situation, but rather to create a win-win situation where you can take the burden off their hands without paying top dollar.

When I think about good places to buy in Miami, it is a good idea to buy in low-income areas that are underdeveloped, yet centrally located to a downtown area or business district. For example, in Miami, a lot of people have moved to the southwest part of the county, for a more "suburban" lifestyle.

However, with the population increase, people are getting tired of the commute into downtown. So right now, before the mass movement into the city, it is a great time to purchase properties in the undeveloped areas near downtown.

In Florida, the hottest place to invest is anywhere on the water. That land is continuing to rise in value. Any market like Miami, that has a huge interest from international buyers, where people come from all over the world to live, is a bigger market for buyers. In fact, foreign buyers are taking more and more properties, so this decreasing of inventory naturally drives the prices up. Other great places to buy in the Miami-Dade County include Biscayne Park, Overtown and the Biscayne Corridor. Some parts of Coconut Grove still have some amazing deals, particularly in the West Grove area going toward US 1.

Some buyers are in a real bind right now. For example, I know a man who was a rookie investor and wanted to do a preconstruction purchase and then flip it before it was completed. He put a deposit on it two years ago, and now the building has been built and he can't afford to hold the apartment.

So now this investor is desperate to sell, even though he will only break even if he is lucky, or he might even take a cut. Investors have a great opportunity here in Miami if they have the funds to take it off the hands of rookie investors or those who are over-extended. I tell all of my new investors that, in the current market, you need to be able to carry a property for at least six months. If you planned on flipping it right away, you planned wrong.

NEW YORK 

ILAN BRACHA PRUDENTIAL DOUGLAS ELLIMAN

Compared to the rest of the country, we have a real dearth of supply. After all, New York City is an island, and if you want to build something, you have to knock something else down, leading to escalating prices. Say, for example, you want to build a major project, and you purchase an existing building for $10million, which you will tear down to build your project. If you need to get the building next to that, it will be $15 million and the one next to that will be $20 million. It is a basic supply-and-demand issue.

Most building owners can wait to get the best price for their property. A builder will pay top dollar for the lot, for the dirt. Basically, people will have to pay premium to develop a new project in this city.

A 6,000-square-foot apartment recently sold for $9.7 million. People are looking for larger units more and more, and this is driving the price per-square-foot steadily higher. Whereas last year, the price was around $1,400 to $1,450 per-square-foot, this year people are willing to pay $1,700 to $1,750. Some properties are even as high as $1,800 per-square-foot.

Right now you can find some of the hottest properties in the area near the new Trump Tower — on the Upper West Side, between 66th and 72nd Streets, ZIP code 10069. However, even from 59th to 66th Streets, on 10th and 11th Avenues, right along the Hudson River, a lot of people are buying there. Why? Because they can buy in a new development (with all the newest amenities, fitness club, top appliances, "smart" buildings) and have great views for the same price you could buy in a pre-war (1920s or older) building in Midtown.

The best deals to be had right now in the city are in the three to four-bedroom units. The reason for this is that there is a bit of hesitation in the market right now. So those who are in the market for these premium units can get them at a price they would not get in the market that we had just a couple of years ago. An important thing to remember is that people holding the apartments in NewYork City are in a very strong financial position. They can, for the most part, afford to hold onto the units even in bad times. You only see price reductions when the property holders get nervous, and they are certainly not nervous right now.