How can real estate investors continue to profitably invest with confidence no matter what the market is doing?
As more American homeowners see their home equity coming back, and investors see property prices rising again and competition up, some are questioning how long the positive run will last. It is good to remember the lessons of the fluctuations of the past several decades. That doesn’t mean that we’re near the end of this bull run yet. In fact, various factors could potentially ensure a longer and sustainable upward trajectory. Still, the key to successful investing is a strategy, model, and system that works anytime.
No matter how bullish individuals are on the US property market or how much data they have to back up their optimism, it is important not to dismiss the concerns others may have. Warranted or not, at least the concerns themselves are real. The most obvious of these is: what if property values slip again? This may not make any difference to homeowners who have purchased their properties wisely – and plan to keep them for a while – but what about investors? Investors don’t want to lose money, as they heard many did when the market dipped before. They take improving property values and increased competition as signs of reaching new highs. They don’t want to wind up in foreclosure and lose properties.
The most important thing to remember is that the market is cyclical. If the indicators you are looking at convince you a correction is coming, then they also mean that property values will soon come back up again too.
The Only Risk Is…
The truth is that the only real risk to real estate investing is if: the investor owes more than a property is worth, doesn’t have the reserves to make up the difference, can’t keep up with holding costs, and absolutely needs to sell; all at the same time.
What hurt so many last time is that they far overpaid for properties, took out high rate loans -which couldn’t be covered by the rent – had no financial reserves or equity, and counted on selling for a lot more right in the heart of the dip.
If you aren’t facing all of these issues at the same time you’ll be fine.
Given the above, the key to investing safely with confidence during all times, is to avoid putting yourself in a sticky situation. If investors buy better, have a better strategy, and are over prepared for the worst case scenario, the real results ought to be better than they expect.
This is possible for all real estate investors, and regardless of whether you are going into real estate with no cash or lots of it, plan to flip houses, or are building an income property empire.
Some of the most obvious factors to strive for include:
- Buying low with a good equity cushion
- Having a clearly defined exit for flips (i.e. buyers lined up already)
- Ensuring cash flow positive rentals
- Building up a reserve fund
- Only acquiring properties you’d be happy with keeping for the long run
If you’ve got enough margin in your wholesale and flip deals, you should be able to sell them in a flash, even in a declining market, for a nice profit. If you have positive cash flow, it really doesn’t matter what the market is doing today – the property is paying for itself, and putting money in your pocket.
Those that invest objectively and stick to proven principles can invest profitably in all phases of the market. They’ll make just as much money in down markets as upward markets. And their consistency will prove one of their best allies in creating the really big results they crave.
If you don’t know how to make the numbers work like this, or where to find properties which make sense, look to a real estate coach and program that has proven to succeed in all market cycles. There are those that have mastered this. Look for what you can learn from them, and apply to your own investments.