HI, I am relatively new to real estate investing and had a quick question.
I understand how to invest in real estate in a poor, down economy. One would buy a distressed house for below market value, fix it up (or wholesale) and resell it at a higher market value. I understand this. However, how would one got about investing in a strong economy? I can only imagine that once one buys a house, the only place for it to go is down…I guess you could buy and hold onto the property for a few years and sell right in the nick of time before the market crashes again but, that seems way to tedious and risky. I was hoping for someone to explain to me how people invest properly in a growing, strong market. thanks
there are always going to be properties in bad condition in any market. Essentially it works the same, you buy low, fix and sell at market value or higher if the market allows it. Just because there is a bull market and you have a junker doesn’t mean you’ll be able to sell for top dollar… i hope that answers your question…
so the concept of real estate investment is the same whether we are in a recession or an expansion? there aren’t any different strategies in a strong market other than buy low, rehab and sell for a high market value?
Not necessarily. There are some finer details that become more profitable in each market. Like you said, a distressed market is an investors dream but that never lasts forever (as we are seeing). In a stronger market, investors are very selective. Other than rehab properties, here are some other investment strategies:
Spec Homes: In this height of a construction phase, builders want to turn over newly constructed home so they can free up cash to build more. These homes tend to be discounted to create a fast sale. Investors swoop in, buy up the spec homes and relist them at market value for the typical marketing period.
Income Properties: This can be a profitable long-term investment opportunity in any market. A distressed market tends to create a higher rate of return, but over the long-term, rental properties can be very profitable. Besides the income stream, all properties will appreciate. The longer you hold a property the greater the appreciation (even if the market falters a little bit).
Vacant Land Development: As owners/contractors start building, purchasers can buy large tracts of land and create a subdivision and thus profit from the sale of the individual lots.
The strategy is the same always. You have to buy distressed properties below the market, relive that distress and sell it at market. The techniques may vary. These techniques are the way to find a distressed property that is below market price is different if the market is strong. But if a house is fixed up perfect and a house is trashed there is always a discount and a premium for property condition at least.
You laugh but my wife beats me up all the time for this. She points out all the people that I have made rich for free and that I should charge for it or at least write a book. I tell her that this stuff is so basic I would feel like stealing the money if I charged for it. I got the knowledge for free just by talking to a neighbor that was doing it and charging for something I got for free just doesn’t seem right to me.