Buying Property in a Tough Market?
While real estate investment is arguably one of the safest and most profitable types of investments you can make, there’s no guarantee that your market will cooperate and perform how you want all the time. When this happens, many investors turn to other markets, even if they’re located hundreds or thousands of miles away. But not everyone wants to do this. They’re not interested in being a remote investors, and would rather buy homes in their own local market, where they can easily visit the property and make sure it’s well-maintained.
So what do you do when your chosen market is one that isn’t operating at peak performance? Do you say, “forget it” and put your investment dollars in a different type of asset?
Instead, you adapt. You rethink your strategy, and you take steps to make your market work for you.
Here are some ideas:
Find a Niche
The most successful investors I know are all ones who’ve found their niche. They’ve discovered a particular area or strategy that works for them, and that’s what they use for all their investments. Why? Because when they focus 100% of their efforts on one thing, they’re able to learn it inside out and hone their skills much more than if they were dabbling in other areas as well. So in a tough market, maybe your focus is on buying and rehabbing blighted properties, or maybe it’s in wholesaling. The key is finding not only what proves successful in your particular market, but also what you’re good at, and then sticking with it.
Make Friends at the Planning Department
While you’re discovering your niche, make some friends in the city planning department. These are the folks who know what’s going on in your area development-wise, and they’ll be able to clue you into any major new growth. Perhaps there’s a proposal for a new shopping center or industrial complex in the works. If so, you’ll want to know, because this means growth in the market, with jobs, people, and money coming in. If you’re aware of this before your competitors, you can start focusing on real estate near the new development.
If you plan to finance your investments, you should also get pre-approved for a loan. This is a no-brainer in a difficult market, especially one where sellers are calling the shots. If you can make an offer with the guarantee of funds behind you from the very start, the deal is much more likely to move forward. But if you have to put things on hold why you shop around for a lender, the seller may lose patience and go with another buyer.
Get a Great Real Estate Agent
It’s also helpful to have a great agent on your team when you’re investing in a tough market. You want someone who not only understands the unique market conditions, but also you as an investor. They need to know what you’re looking for in a property, as well as what your short- and long-term investment goals are. With this information, they can present you with a list of potential investments that align with your strategy, from the moment they come on the market – and maybe even before if they’ve really got their ear to the ground.
Lower Your Expectations
Yeah, I know. This one is kind of a bummer, but it needs to be said. When you’re working in a difficult market, you have to lower your expectations. The chances of pulling in major cashflow are slimmer, and your pickings won’t be as great, either. If you go into a deal with the expectation that you’re going to make a boatload of money, you’re probably going to be disappointed. Save yourself from that, and tailor your expectations to the reality of the market – and not your investment fantasies.
As a final thought, remember that real estate markets are in constant flux. They’re always changing, and just because a market is tough now doesn’t mean it will be that way in the future. The trick to succeeding in these types of markets is to adapt your strategy and goals to what’s actually happening at that time, and be patient! Real estate is one of the best investments you can make, and history has proven it time and again.