The 4 Cycles to Real Estate Investing – A 4 Part Series (Part3)
(The Cycle 3 Sellers’ Market) Well indeed the first two posts in Buyer’s Market has proven to be interesting, the Buyer’s Market is what has attracted much interest to both home buyers and real estate investors. The big missing piece to real estate investing is to know the seller’s market. After many people lost a fortune in stocks and real estate during the economic collapse that started back about 8 to 10 years ago they were eager to understand the buyer’s market. Investor’s know that you make your money going in. You simply realize the equity award at time of sale. Yet the biggest overlooked part of their due-diligence is to understand when the optimum time to sell is. Understanding these buyers and sellers markets is paramount to fully execute an effective exit strategy.
O.K so as markets transition from the best time to buy, the “Cycle 2 Buyers Market” what does it look like beyond that point. Those who bought in Buyers’ Market may find advantages to sell now as they can make a nice equity play. BUT, this is the point where prices and the demand for real estate rise. Riding the wave of home price increases to the longest duration is your best bet for optimum returns. Riding this wave too long can be dangerous as many have found out in the past decade so understanding the distinctions of these cycles is paramount to your investment. Because of the rising prices there are still opportunities for great investments. Watch this cycle closely.
Distinction of “Cycle 3 Sellers Market”
• Housing inventory is being reduced • Speculators are buying fast and furious • The unemployment in this market is lower and perhaps still shrinking • Home prices are on the rise • Rental prices are on the rise • Demand for real estate has reached its highest level • Market time for sale is short
Strategy to buy in this market cycle
• This may be your second best buying opportunity • Buying early in this cycle 3 sellers’ market still makes sense as prices are still on the rise (though your hold time is reduced, understanding this is key to successful investing) • Buy and hold till Cycle 4 sellers’ market. Often buying a property that is in great shape but very dated is a great strategy. Invest just a little in cosmetic repairs and rent for maximum cash flow. As the cycle 4 seller’s market emerges you may want to do capital improvements and sell for top dollar to the retail buyer.
This is the market where the buzz is being generated and people are making good money in real estate, people tend to follow the thundering herd because they hear all the wonderful and prosperous stories. Most of these stories are generated from buyers who bought in the cycle 2 Buyer’s markets. The general public who has not been as diligent as the investors who monitor these cycles are now finally hearing about the great opportunities, so they too want to get in on the action. It is all this action that will drive up the prices even further until we reach the cycles 4, Seller’s market, which of course will be the next post.
Next post 4. (Cycle 4 Sellers’ Market)