How do some real estate investors manage to stay safe and keep making money, no matter what the market is doing?
Sensationalists will always seek the attention that comes with posing a shocking point of view. The same holds true for those in the real estate market. To that point, should investors be questioning their investment strategy and acquisition criteria? Does what other people say impact what you should be doing? In other words, how does the current state of the market dictate how you invest?
It always makes sense to pay attention to what’s going on, and question assumptions. Examples of what some people are questioning include:
- Markets being ‘too hot’
- Properties selling ‘too fast’, within hours
- Some properties sitting on the market for extended periods
- Property prices that don’t make sense for investors
- Everyone saying “we’ve got a little longer”
The Bull Run
The majority of investors and analysts believe that we are still in a strong recovery phase, and are bullish on the outlook for U.S. real estate performance. ‘Smart money’ and ‘big money’ are still plowing billions into American real estate. That said, there are many factors suggesting they’ll see their asset values appreciate. Trends include:
- High and rising rents
- Over 7 million boomerang buyers becoming qualified for mortgage loans again
- Millennials entering their peak home buying years
- Boomers needing to restructure their investment portfolios and housing
- Low interest rates
- Historic values, especially compared to the stock market
Current economic fundamentals and historical price trends suggest there is still a long and robust period of growth to come.
Just because the data suggests we’re still in for a long upward run doesn’t mean all protected local real estate markets or individual properties are going to be insulated from unexpected fluctuations.
While there is every reasons to be extremely optimistic about the current direction of the U.S. real estate market, some investors may want to think more about how they can win, even when conditions are less than optimal. That means investing soundly to protect against losses. It also means finding ways to generate positive returns, no matter what direction the market is going.
Invest in properties that will continue to perform, and deliver. This applies to your strategy for investing, and how you structure deals. For example; if you already have a 125 percent loan in good times, and aren’t turning in any real net cash flow, that position is only likely to worsen in tougher times.
Real estate wholesaling, value add fix and flips, long term holds, and private mortgage lending are all investment strategies that can be used profitably. To that end, these are all strategies that can be used at any time during the market’s cycle.
It’s wise for real estate investors to stay on their toes. Still, even when that suggests the market is only headed up as it appears now, it can still be smart to double check your investment strategy and deal structures to make sure you are protected from the downside. Remember, no matter where the market is, there is a viable real estate investing strategy.