and an awful time to be a speculator.

Do you know the difference? More importantly, do you know which one you are? Hint: It is all in the risk levels and how they are managed.

And yes, I still believe the recession has started.

The reason investors are loving the current turmoil in all of the equity markets is because they indicate current or future opportunities for long term gains.

Let’s take real estate. Yes, I know there are sites that still proclaim it a dead market and only a fool owns property and now it the best time to be a renter and blah blah blah. But, the reality is rents are going up and some areas they have shot up significantly. So, current renters may (actually will) be in for a very unpleasant surprise when their lease is due to renew.

See, the shakeout is proceeding as expected and the first round of property dumpers is complete. These are the ones who either dumped them at very deep discounts and losses or walked away from them in their entirety. (Think Casey Serin types. No clue, and now, no holdings.) But, those with some staying power and equity didn’t panic. They are still holding their properties and renting them and they will be happy to match market rents as they go up over the next year in many areas.

So, what is round two? That is the lenders dumping properties. It hasn’t even begun, really. Lenders have been doing everything they could (well, in their eyes anyway) to minimize the properties they have taken back in foreclosure. Many have announced formal plans to work with borrowers to help them keep their homes. This makes sense because the borrowers who are still in those homes are the ones who would really like to keep them, if they could.

But, against all efforts the amount of REO is growing just like the number of listed properties on the market.

When the lenders really start dumping their REO the next round of incredible opportunity will present itself for the well prepared investor. The lenders are going to be looking for the easy way out. That means package sales if possible, auction individual properties if possible when they can’t bundle and list on the retail market only as a last resort.

A well funded investor would be well served by forging a relationship with a well placed loan officer at a small regional lender. They can introduce you to the loss mitigation officer who will be able to talk about packages. Often, they have short term money at very attractive rates to help make this problem “go away”.

If dealing with the lender one-on-one is not your thing then the auctions might be your bag. But, be warned, you usually have to have certified funds in hand for 10% to 20% of what you purchase (including the added auction fee) and you often have as little as five business days to get the rest of the funding and close the deal. Short fuse, but if you have access to the cash, these often go at very deep discounts.

Personally, I am not aggressively buying real estate right now. I will take the great opportunity that falls into my lap, but I have given our buyers the rest of the year “off” to prepare for next year.

It is a great time to pause and evaluate your local market, then formulate a plan of action to systematically take down as many deals in 2008 as you want.