For starters, when a market cools, buyers tend to retreat. Like so many things that involve financial risk, many people play the game only when they know they have a hot hand. This results in less compe- tition, which generally translates to more opportunity, including no longer needing to overpay for these highly coveted assets. Second, unlike in a hot market where deals are gone before you know about them, in a slower market, good deals get marketed. An active real estate investor will begin to see them marketed more widely. Following are three sure-fire ways to find deals in a down market. We have seen these play out firsthand over two separate market cycles— the Great Recession of 2008 and the 2015 mini-blip. Though different in size and scale to anything the experts are predicting in this market cycle, both slowdowns taught us valuable lessons on how to keep the pipeline full. That’s because both cycles involved many of the same obstacles we are dealing with today: uncertainty and availability of capital (or a tightening lending market).
market in the United States has been on fire. But, things are starting to change. With interest rates rising and inflation affecting consumer sentiment, things are beginning to cool off. Gone are the days of massive bidding wars based on insanely low interest rates and low levels of housing stock (inventory). Although I am not predicting the next season, I do know we are entering a market cycle vastly different than many have grown accustomed to over the last 10 or so years. With this imminent change upon us, the question is: “Is now the right time to invest in real estate?” “Yes!” I am not alone in this sentiment. Most experts agree that real estate, although it goes through down cycles,
has historically been an appreciating asset class—and is expected to be going forward. Assuming this is accurate, how does a potential investor find a good deal in a shifting market? Let’s unpack that. FINDING THE RIGHT DEAL During the last few years, you could buy a home in several markets across the country, and based on appreciation alone, it would increase in value by 10%, 15%, or even 20% with no effort on your part. Buyers simply needed to let the market do its thing. A lot of people have made fortunes during this run, but how do career real estate investors (and even new investors) find winners in today’s market cycle?
1. START A CLUB Many of us are familiar with
the REIA (Real Estate Investment Associations) and REIG (Real Estate Investment Groups) model. These groups are generally lead funnels for real estate investors. By bringing new people to the group, real estate inves- tors have the benefit of hearing about some of the best deals in their local markets firsthand, without having to ask, because the networking alone brings the deals to the surface. As an added benefit, often the people who form these groups (for better or worse) are considered an
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