On the surface, a slow market seems to hold a negative connotation for many – however, it is the best thing to happen for real estate investors. Not only does a slow market present multiple opportunities for excellent rates to invest in, but it also gives investors the opportunity to profit greatly and maintain a steady cash income. Prices have hit rock bottom and investors take charge. The following tips and recommendations will help you take full advantage of the best investment season.
Understand the market.
Investing in real estate can be a long and tortuous road, especially for newcomers to the field. Thus, one must always be well informed on the current trends in unemployment, rental increases and decreases, average income, interest rates, crime rates and government policies; all of which will allow you to properly understand the current market and make informed decisions about future investments. By keeping track of these real estate cycles, one can appropriately choose to expand one’s portfolio or reposition the weak investments to more profitable ventures.
One of the most common assumptions people make when hearing of the upcoming or current slow real estate market is that it is not a good time to invest. It’s quite the opposite actually – a slow market for real estate investors is like a massive sale at your favourite store. Despite the slow economy (or recession), the average rental fee is still quite high and is increasing simply because there is a high demand within the rental market. Thus, investing in smart properties is an excellent means of gaining a potentially high return on investment.
Know your role in the market and negotiate!
A slow market is frequently referred to as ‘The Buyer’s Market’ because you, as an investor, have the upper hand in the negotiations over the final price of the property, unlike the sellers during a hot market. This crucial information should provide you with a boost of confidence to negotiate aggressively! The seller will always want to sell for more, and the buyer always wants to buy for less. Between the two parties involved, you have the upper hand in the current market so keep this in mind and reach a deal that does not limit your profit in the long run.
Find a trusted Real Estate Agent/Broker
Regardless of whether you are a novice or seasoned real estate investor, it is vital to have a handy broker as your savvy right-hand man. Think of a real estate broker as your best friend – a partner who has the best interests for you in mind. By hiring a real estate broker, you are not only hiring an expert within the field but also making your own life a lot easier in the long run. A real estate broker is better qualified to recommend to you the right investment opportunities which will offer the highest value and return on investment. Most experienced brokers have some trusted contacts as well, which will further allow you to have more significant investment opportunities in the right property.
Furthermore, just like any other expert within an industry, an experienced real estate broker will know the true worth of the property, making them better equipped to recommend a competitive price. Any investor will know (and groan) over the massive amount of legal paperwork involved in securing an agreement. With a real estate broker on your side, you will be able to rest assured that they will handle the paperwork and ensure that the contract and legal matters are in check.
Don’t put all your eggs in one basket:
One of the most essential and age-old tips for real estate investors is to follow the golden rule of investing: don’t put all your eggs in one basket. Even the most veteran real estate investors cannot accurately predict the outcome of their investment. By diversifying your investments, you are promised the highest return for the least risk. There are many ways to expand your investment: consider developments besides residential properties such as commercial, industrial or land properties. One could also chase profitability by examining properties in a broad geographic area. This could mean looking at other cities besides your own or even going international. Ultimately, a larger pool of investments will protect you against the precariousness of local markets.
Following the advice to diversify your investments, crowdfunding platforms are an excellent way for investors with limited incomes to gain long-term profit and build their portfolio. During a slow market, crowdfunding real estate properties mean that you risk losing smaller sums of money and are subject to lower fees. Although crowdfunding is a newer business model within the real estate investment industry, it is an excellent source for newcomers within the field to take advantage of investing small amounts during The Buyer’s Market.
Be smart about your investments
One of the most common mistakes a beginner makes while investing during a slow market is buying in areas they believe will give greater profit once the market is back in order. Such areas include the outskirts of the city centre or town as they are usually cheaper to buy in during a slow market. The problem with this hypothesis is that that’s all it is – a hypothesis or prediction, not a smart investment. Instead, areas within the city centre or already developed and popular areas are the places to invest because there already is a need and demand for the product. Regardless of the economic situation, some areas will always be populated because the people within that neighbourhood have the financial means to do so. Thus, investing in a popular and well-developed area will provide you with a higher return for your investment and lower your risk of going into a loss.
Moreover, the type of development you choose to invest in also makes a massive difference in the probability of high turnover. Investing in vacation homes may not be the best route to take as such developments tend to depreciate at a higher rate. Instead, focus on investing in multi-family dwellings such as duplexes, triplexes, apartments and complexes. As mentioned previously, your main focus is to tackle the need and demand cycle – no matter how bad the economy or market is, people still need a place to live. They may not need to live luxuriously or own two homes (hence the risky investment in vacation homes), but they still need to live comfortably.
Take care of your investment but don’t over-indulge.
Much like most things you own, your investment needs care and repairs sometimes. Regardless of the current market, you still need to run maintenance checks routinely if you ever plan to sell your property. Make sure you service your essential utilities such as the water heater, smoke detectors, paint, air conditioning, and water supply. By maintaining these regularly, you avoid the risk of what would be a small fix growing into a much bigger issue. Although renovations may sound like a great idea when your property is not selling, expensive granite or marble countertops should not be your top priority. Use inexpensive but good-quality materials to make the small difference in your property, but make sure that your renovations are an absolute necessity. In sum, take advantage of the slow market and conduct asset enhancement initiatives so that you can reap the rewards once the market picks up again.
Focus on employing resources
A fruitful real estate investor knows that real estate is a team sport. No one individual can safely and effectively invest in properties without the help of crucial team members and resources. As mentioned previously, understanding the market is vital to gain the upper hand in real estate investments. Whether it is through courses or books online, thoroughly understand the unique industry that you are in, so, you can make informed decisions in the future.
Along with the benefits associated with real estate brokers, it is a smart idea to have a trusty real estate attorney on call. They play an essential role in ensuring that the contracts and closings are all in order. Unless you are self-managing, employing a property manager is a great call to ensure that your properties are in top condition and won’t force potential buyers to turn the other cheek. Networking is also highly critical: not just with broker and buyers, but also other local investors. Having a small group of investors discussing their ideas and predictions can make a significant difference to your future investment plans. Lastly, befriend a handyman (or electrician, plumber and fixer-uppers) as they can help you with quick fixes before a new showing. Although focusing on resources may not seem like the best idea during a slow market, it is a great way to plan for the upcoming ‘hot’ market. Keeping your properties ready for the next real estate cycle will save you precious time spent on searching for such resources when the time finally comes.