Real Estate Investment In A Changing Market
by Michael Russell
It's hard to miss the news reports about how the real estate bubble is bursting. While this may cause panic for homeowners or unseasoned investors, you can still invest in real estate in a changing market. The reason for this is that there really is no ideal market condition that you have to be in to make money in real estate. The key is to understand what your specific market is.
Know the area and the area economy. If you see many houses going into foreclosure, check the local economy. If the city has a very large corporate employer who closed or laid off a lot of employees, this could be the reason that the local people are going into foreclosure. This will also affect who will be able to purchase your property, if that employer was the major source of jobs in that area. So, those foreclosure deals are really not the investment deals they seem to be. However, if the economy is going along well in that area, it could be that too many people financed their homes with interest only loans or 100% financing. These are the foreclosure properties that are the deals for you. Do you understand how these two scenarios are not based on an overall real estate market, but local conditions?
Understand the seasonal fluctuations in your market. These fluctuations could be from weather or employment conditions. Are you in an area with year round warm weather? Then markets will be good for the 'snow birds' that want to purchase in winter months. In multi season climates, house sales pick up during the spring and summer months. So take advantage of the down times in your area to find the deals. If people in your area are trying to sell a house in the off peak selling season, there is a reason. Usually it is a divorce, job change or something else requiring a fast sell. These are the motivated sellers that you want to find and can find easily during the non-peak selling seasons.
If your area is currently experiencing a rising housing market, as an investor, this is the trickiest market to manoeuvre in. It's easy to get caught up the hype of quickly rising prices and many new investors happily pay market value for properties, only to find out that they can't resell them for any profit. The sharper a market rises, the greater possibility that the market will at the very least flatten out, if not fall downward. If you are a lucky investor who gets in on the beginning of the rise, then you can hold the property a bit longer and take advantage of that. However, most investors grab properties at the height of the rise and then have a property worth less than they bought it for a few months earlier.
No matter how you decided to invest, make sure you have your exit strategy ready. This should be in place before you even purchase your investment property.
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