Should You Still be Buying in a Down Market? The Answer is Yes, and Here’s Why.
I get asked this question a lot: are you still buying even though the market is slower?
Usually people are referring to the purchase price of property when they talk about the ‘market’. Rarely do they refer to the other side of the equation, which is so significant in investment real estate–the rental market.
For me, this question is a little like asking if you will stop going to work when sales are slow. (Okay, maybe you would if your boss hands you a pink slip.) But let’s say you own the company. Of course, you’ll continue to go to work. Sometimes a slow sales time means doubling down on efforts. If you can shift your thinking and see that with down time comes opportunities, then I urge you to go looking for diamonds in the rough.
A downturn time requires some research. It is important to have a good understanding of where the resale market is at. Try answering these questions…
If all of my colleagues across the country are experiencing a down turn in price and seeing an increase in time on the market, I can safely conclude that we are seeing some kind of recession, and consumer uncertainty. I’m always looking for a contributing factor—the something that may have triggered this–like an interest rate change that has inspired fear in potential buyers, or a disaster like 9/11 that has reduced people’s interest in being mobile.
If it is just your region that is experiencing a market dip, there must be something going on. Perhaps there has been a closing or layoff at a major business in your community, or an increase in crime. It is the investor’s job to figure out what is causing the market slowness and project whether it is likely to continue a long time. If you believe the situation will persist and you are seeing folks move out of the community, it may be time to move on to another area.
if the same number of people are entering the market and I see fewer people buying there, well, they have to live somewhere, right? I can expect an increase in demand for rental properties, and increased demand means rents will go up.
See the opportunity?
So, maybe resale value is down or flat, but rental opportunities have just improved. It is highly likely that I will see a decrease in time necessary to fill a property. Plus, if the market is down, I can assume that sooner or later, properties I want to buy will drop in price due to the NEED to sell, not simply the DESIRE to sell. If I can now pick up a property for less than I did a year ago and get more rent for it, aren’t I ahead in this equation?
Sounds like a win to me!!!