It Is Also Worth Noting That Markets Can And Will Change

Category: Finance, Real Estate.

I get a lot of questions from people asking, Will real estate investing work in my market?

There are many ways to describe real estate markets, including hot versus flat or rising versus falling or buyer s versus seller s. The truth is, real estate investing works in every market, but you need to learn your market and adapt the techniques that it requires. All real estate markets are subject to fluctuations, but these fluctuations typically do not greatly influence the ability for the informed investor to make a profit. Unlike the stock and commodities markets, real estate markets don t rise and fall rapidly. In fact, such as flipping, some strategies, can be the least risky way for a beginning investor to make a profit in an uncertain market simply because of the relatively short amount of time the flipper will own the property. For long- term investing, additional market factors are important to your buying decision.

Let s be clear: there is no such thing as an ideal real estate market for investing. Investors who plan for short- term real estate market appreciation are speculating, which is outside of the basic model of low- risk investing. It tends to be more difficult to find bargains in rising markets, because if the, however market keeps rising, the probability of selling the property quickly for a large profit increases. Yet you need to assess the true value of these properties based on when you expect to sell the property. In contrast, when property values are falling, more so- called bargains become available. Thus, your purchase must be made at a steep discount to allow for a profitable sale later. Become educated in your local market first by understanding the large- scale trends from global down to national, and specific neighborhoods, regional.

Some basic strategies can be used successfully in virtually all market conditions. Learn about target neighborhoods, enlisting the aid of successful real estate professionals along the way. Armed with this type of information, you will be able to make good decisions. These professionals will help interpret market indicators, such as the average length of time houses are sitting on the market this month versus last month or last year. Inventory, defined as the number of properties offered for sale, is a good indicator of current market trends. In rising markets, sellers often capitalize on the excitement of new listings to get properties under contract quickly, at premium asking prices.

If inventory is low because of building restrictions or geography, then high demand will lead to rising prices. There are also seasonal fluctuations in inventory, such as fewer listed properties in the winter months than in summer and a surge of listings in the spring. Generally, seasonal drops in inventory reflect the trend to market properties more aggressively in spring and summer months when real estate markets are more active. Some areas, such as resort destinations, follow seasonal trends. Properties sell year- round, though investors should plan to reduce the price for winter listings or at least know that properties take longer to sell during those months. This type of market offers great opportunity to the savvy investor.

While most markets have risen over the last five years, some are flattening out, and some may have already dropped. When property values are falling, and many sellers, inventory often rises become highly motivated when their properties fail to sell quickly. Whether sellers need to move from the area, or have other, are struggling financially pressing reasons to sell, they may well accept a below- market offer. Motivated sellers will do whatever it takes to sell their property. Investors know that a weak market can offer extraordinary deals, though flippers need to proceed with caution. It always pays to know the market and purchase the property at a price low enough to net an eventual profit, even if the market continues to fall. In a falling market, even a few months delay can turn a sound deal into a headache.

The common myth is that you cannot make money by in a bad real estate market. It s all in how you do the math. In a bad real estate market, you can often buy junker properties for 50 cents on the dollar and sell them for 60 cents. It is also worth noting that markets can and will change. However, if the market takes a downturn after a purchase, there can be trouble ahead. If the market rebounds after a purchase, then all is well for the investor.

Markets commonly show signs of slowing or turning over several months. More likely, clues come from local market conditions, oversupply, such as unemployment, or a change in demand because of living conditions. Sometimes the early signs come from national economic trends, such as rapidly rising interest rates or sweeping changes in tax policies that affect homeownership or investment( e. g. , the rapid change in depreciation rules for real estate investors in the late 1980s) . More important than guessing the future of a local market, you need to have a clear plan in mind when purchasing property. An even smarter investor will have a backup plan or two, in case the first course of action doesn t work. A smart investor knows exactly how he will exit the property before he buys.

In short, know your market and your plan before you begin to invest.

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