There are always stories of smart investors who take advantage of the downturns in real estate cycles, downturns in the stock markets, or overall downturns in the economy. While some people ‘hunker down’ or even panic during the difficult periods, others look for opportunities, or specifically wait for the opportunity cycle to come, as it has now.
While one of the mantras of investing is to ‘Buy Low-Sell High’, this doesn’t always work out, does it? What we inevitably see is this: when something is ‘hot’ (like home rentals or condos recently), everyone rushes in to buy, but when it drops or freezes up, everyone panics and sells (or tries to sell). Often we ‘Buy High – Sell Low’, and that is a pity. Of course, when it comes to the realty world, an added culprit has been financing. Some investors over-financed, or when everything else in their portfolio and life crashed, they had trouble meeting debt service. It certainly seemed that in some cases, credit was too easy – just as now it is extremely difficult to obtain. A majority of lenders have not been open to working with borrowers who are in a jam, either.
When market conditions are in an opportunity state, as they are now, two points seem clear: cash is king and opportunities abound. Many investors are nervous about values or wonder if the economy will soften further. If they are suffering with under-performing real estate bought at the height of the market, they understandably become fearful of new acquisitions or frozen into inactivity. However, others are just nervous in general and fail to see the opportunities in front of them. There is no question that property can be picked up at deep discounts in many parts of the country, whether it be a home for rental or a commercial property. Thorough due diligence is needed, of course, and a basic analysis of cost of ownership should be weighed. It is a buyer’s market and a buyer should negotiate hard, as they usually will have the upper hand. One who may acquire a property at a deep discount today with the mantra to hold the property until a solid recovery is in play, and then sell, may find success in their strategy. Timing is key.
For those investors holding under-performing property they acquired during the “up” market, the theme for this year is to “ride out the storm” and make it through whole. But for those investors who have cash, interest and a strategy, look at the great buying opportunities that exist today. The window of opportunity will not last forever. Always make sure to confer with your expert team when considering a real estate acquisition (CPA, attorney, real estate agent, title agent, spouse and lender, etc).
