Real estate investing goes through cycles. Real estate is not a big market. It is made up of regional and local markets. Real estate is not like buying or selling milk and eggs. There is no stable supply and demand. In real estate, supply and demand are constantly changing. Yet we all know that the savvy investor buys low and sells high. What is your crystal ball telling you today?
When will your local market peak?
All of this is food for thought. Or maybe a good topic for discussion at your next investment club meeting. In the rear view mirror you can clearly see that the time of purchase was 6 or 7 years ago. Real estate was one of the best investments 7 years ago. The market has been flooded with foreclosures, REOs, short sales and individuals desperate to sell. Buyers were very few and far between. Unemployment was at historic highs. Foreclosures and unpaid debts have destroyed people’s credit ratings by the millions. If you didn’t have cash, even a great credit score probably wouldn’t buy you a mortgage.
Fast forward those 7 years. People are fully coming out of foreclosures, bankruptcies, bad credit scores and being fully employed again. Home loans that were once underwater are now afloat. Home values have risen sharply. Markets like San Francisco, New York and Los Angeles have passed the last bubble peak in terms of price. If they do not drop in price, these have become stagnant prices. Bidding wars are becoming fewer as few buyers can afford or are willing to pay peak prices.
Major markets have shifted, with Seattle leading the nation in price appreciation for several months. Outlying areas as remote as Tacoma are seeing steep purchase price increases. There may or may not be remaining opportunities in these secondary markets.
The questions to ask yourself are for how long and how rapidly will your current holdings continue to appreciate during this real estate cycle? It takes time to liquidate for the top dollar. Before marketing a property, most investors have maintenance, repairs and improvements that need to be done before marketing at the best price. Have you given serious thought to whether it’s time to sell current holdings and what it will take to make that maximum profit?
Those with multiple operations should be fully aware of which ones generate the highest rate of profit and which ones are at the bottom of the list. Now may not be the time to divest all properties, but it may be time to sell the underperforming ones. Is it time to sell before your local market goes over the top?
Investment Diversification and Distressed Properties
Enter your profit. And back to real estate investing. At any point in the real estate cycle, there are great investment opportunities. Now may be the time to diversify your portfolio into commercial real estate. There is still a lot of potential in good business areas. Or it might be time to branch out into vacant lots or brownfields. Most indicators show strong and growing demand for a new supply.
Specialist niche experts always have a network of people looking for distressed properties to sell. Houses infested with mould, houses damaged by fire, those with crumbling foundations, etc. never appeal to buyers looking for a turnkey home. If you are a niche investor, it may be time to sell an existing low preform property to start a new project. Start early because it takes time to market and sell a place while simultaneously looking for the next great deal.
No one can time the market perfectly, and anyone who says they can is either lying or ignoring how lucky they got. But you should always strive to buy low and sell high.
Feel free to leave a comment if this article was helpful to you or if you have a question.
estate investing for eleven years. He also draws on more than 25 years of business experience, including 12 years as a director at Boeing Aircraft Company. Brian currently lives in Lake Cushman, Washington. A vacation destination, a few miles from a national forest in the Olympic Mountains with the Pacific Ocean a few miles in the opposite direction.Author Bio: Brian Kline has been investing in real estate for over 35 years and writing about real