Buying investment property in a Down Market

On an international scale, the real estate market has seen significant gains in the past 5 years. Many enthusiasts have purchased housing on the way up, yet those same investors are afraid of buying investment property when the market goes down. Why? Unless people are looking to make an immediate profit by flipping, then buying when the market is low and holding onto the investment until the market rises again is among one of the best real estate investing secrets. Hold on to a home or piece of property long enough and its likely you’ll see gains.

A Down Market
As mentioned above, many key markets in the world have seen big realty gains, yet these rising profits are starting to wane. Therefore, in many areas, the market is either flat or on a downward swing. Rather than being scared off by this inevitability, why not embrace the option to buy low? After all, isn’t the best investing tip to buy low and sell high?

Because most of the money is made in the buy, choosing to purchase real estate when people are more desperate to sell gives the buyer greater control.

Predicting Market Down Time
Predicting a market’s down time isn’t always as easy as it looks because ‘down time’ can manifest itself in any market.

In a strong market, there is always a short season where the buyer will have more control. For example, think of weather conditions or financial factors which may impact the buyer getting more of what they want. In a hot market, Christmas is usually a good time to buy because the weather is dreary making it difficult for people to see the house or condo in its best light, and people are financially strapped with the demands of the holidays making them more willing to let go of their property.

In a down or flat market, the same predictors apply from above, but in addition, it’s important to consider factors like seasonality in that different housing types have varying trends depending on the season. For example, family homes will go quickly in the spring and early summer so families can move when the kids have school breaks. Alternatively, the condo market has less obvious trends, however, late fall is a good time for potential buyers to negotiate because sellers don’t want the hassle of moving around Christmas, and if they do, they’ll usually be willing to settle on price.

Long-Term Flips
In a down market, a flipper must be willing to hold on to the property until the market rises again. Even though immediate gratification flipping seems to be the trend as of late, professional flippers also know the value of buying low, holding on to real estate and then selling at the right time.

Other than a strong or week market impacting long-term flips, other factors like local development plans slated for the area, and changing demographics and zoning also impact an area’s real estate prices.

Therefore, if you’re looking to make the best profit in house flipping or real estate investing, be strategic about your buy; study the historical market trends, future predictions, development plans and consider seasonality.