Too many novice investors try to time the market and ride the waves of market appreciation. Certainly buying and selling at the perfect time (when the market peaks, for example) is the easiest and most lucrative way to invest in real estate. It’s also the riskiest because few people have enough foresight to figure out where the top and bottom of the market are.
Instead of trying to guess the bottom and top of a market, stick to particular deals that make sense. In any market, you can find particular bargains in solid neighborhoods that make sense. Buying houses at great bargains is easy when the market is soft and sellers are flexible. Even if you’re in a hot market, you can still find homeowners who want to sell below the market for reasons other than money, including the stress of a divorce, a death in the family, a job transfer, or other life changes. At times like these, people can be highly motivated to sell their houses quickly. If you’re in a flat or falling market, you can either invest elsewhere or stay in your farm area and buy extremely cheap. Even if you seek emerging markets around the country, you can still end up with a bad deal that won’t make you money.
In short, each deal must stand on its own. If you plan on Wholesaling, make sure that the numbers will work for the investors that you are wholesaling to. If you plan on doing Rehabs or Rentals, there are formulas that you should stick to also in order to decrease your risk and increase your chances of success. The late Will Rogers said, “Buy when others are selling and sell when people are buying.” This may work for stocks because you can get in and out of a deal in a short time. However, in real estate, you can’t expect to time the market in terms of days. Unless you’re in a market where bidding wars occur and prices go up in a matter of days, plan your strategies in terms of months and possibly years.
Finally, having a good mentor onboard that understands real estate, the numbers, and the current market can be a huge help and increase your chances of long-term success!
President and founder of the Colorado Landlords Association, best-selling real estate author and attorney, landlord and real estate investor with 28 years' experience.