The real estate market is cyclical. On average every 10 years, the real estate markets that are heated up will turn down. This is due to various reasons, but mainly because of supply and demand. Just like any commodity when the supply is much greater than the demand then prices will decrease.
Everyone is waiting for this type of market to buy an investment property. We hear it from Realtors and Investors alike “ When the real estate market is down, then I will take advantage of the low prices…”
I’ve seen people make the worst mistakes in heated and down markets. As a 25 year experienced Real Estate Investor if you are looking for long-term passive income then you can buy in any market, but at the end of the day, it is All About the Numbers. Here are my recommendations to invest in either market….
Markets are down and Prices are Low
In this type of market, it is good to buy low for long-term investments; however, with fix and flips, you are going to run into a problem. It will be difficult to sell high. Anyone trying to sell their property to obtain cash will not receive their property value. This is what we call in Real Estate a buyers market.
When prices are down, it creates an opportunity for some buyers that have cash available. However, for people who don’t have cash available and want to sell, then selling in a down market may be very challenging. For most people they might not have the means to buy during this market or investing may not be a priority. So sellers should be very patient and wait until markets recover in order to make a profit.
Markets are Heated and Prices are High
In this type of market, I highly recommend buying properties from “Emerging Markets”.With Emerging Markets, you are more than likely to find properties with great Return on Investments. This will help the investor overcome the issue of paying high dollar for a property during a heated market.
If you plan to sell your investment property during a heated market, this is the time to sell. So make sure if you plan on buying low with a fix and flip property that you can rent it out until the market is heated up again.
Long-Term Passive Income Investing
If you are looking to invest in properties that produce long-term passive income, then you can purchase property in either type of market, but the numbers have to work. I tell my clients all the time. It is All about the Numbers. You can buy in a heated market or in down market and get the best Return on Investment when your numbers are right and your location is right.