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The typical real estate cycle
The typical real estate cycle goes up and down with higher highs each cycle as well as higher lows so that the market appreciates over an extended period of time. In a typical market there is usually a complete cycle every 10 years or so, but this is an average over many years. I often hear investors talking about making sure to buy when everyone else is selling and sell when everyone else is buying and I'd like to speak to this for just a short time. I've blogged in the past about how there is no 'good' or 'bad' market in real estate. When the market is appreciating quickly it is a sellers market and when depreciating quickly, a buyers market. I don't disagree with the investors who desire to purchase in a down trend and sell in an uptrend, but I also have a slant I would like to posit in order to help you think in different ways when thinking about real estate.
The best time to purchase real estate
When is the best time to purchase real estate? I'm glad you asked. As I just mentioned... I don't disagree that a great time to purchase real estate is when the market has fallen or is falling. The problem with this idea, however, is that spawns innumerable prospectors, not investors, because nobody knows when any market is at a low. When you begin to take on the mindset that you must get the best possible deal when the market is absolutely at its lowest, you will start to take unneeded risks because you are thinking about how to make money in the same was as people typically make money on the stock market (buy low and sell high). Few people tell you about the commissions for real estate agents or lawyers fees that go into purchasing and selling a property (just like a brokerage helping you with stock transactions). Because of these extra expenditures many investors don't make as much as they think they are making. If you miss the low by a bit and miss the high by a bit and give a ton of money for the transaction, then you aren't making as much because there is less room for error.
My 'deep thought' for today is to suggest the best time to purchase real estate is when it is cash flowing; when it makes risk-adverse sense to do so. Read my former blog on cash flow as the #1 criteria you need to look at when purchasing real estate. If it's cash flowing, there isn't a bad time to purchase real estate because it will take care of itself. Even at the peak of a market if I buy something that cash flows well and hold it for 10-30 years, I'll do extremely well no matter what happens in a market (barring WWIII of course). Forget about timing the market perfectly and start investing! Find a great deal today and then purchase it instead of wasting your time procrastinating while all the good deals are taken by clearer thinking investors. This is one reason I don't typically find property on the MLS system. There is too much competition on the MLS and all the fantastic deals have 10 offers within 24 hours. The highest bid often wins out and the place that was listed at 20k less than fair market value is now sold for 20k more than fair market value (that isn't the kind of deal I get excited about). Having said what I just did, there are times when using the MLS system does make sense, and many times when using real estate agents make sense. Know when these times are and use them to your advantage.
The worst time to sell real estate
By far the worst time to sell real estate is when you have to sell. There really is no argument about this among savvy investors. When I look to purchase real estate from someone else I'm usually looking for someone that needs to sell her/his property quickly because I know I can negotiate a better deal. This isn't the only type of deal I do, but why would I not maximize my time by simply looking for the deals with the greatest potential. I never want to be in a place where I am over-leveraged or in a tough spot and then must give my property away for any reason.
What is the solution? If you know me, you know what I'm about to write. Two words: CASH FLOW! If you have good cash flow, you should never be in a place where you need to sell your property because it is not only taking care of itself, it is also contributing to your income.
Conclusion
Start thinking like an investor who will have long term wealth instead of only short term gambles that sometimes pay off. Real estate is very forgiving and you can make a ton of mistakes and still do well, but why tempt risk by taking so much of it on? Go out and find a cash flowing property today. I know of many cash flowing properties that could be bought right now even in Calgary's strong current market. If you need help contact someone, but don't make the mistake of never doing what you need to in order to take care of your and your family's future.
Happy investing!
If you would like to learn more about investing in real estate please
contact me at the email address listed at the beginning of this article
or go to my website at: www.akerahomes.com/investing-in-real-estate.html
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