by Theresa Bradley-Banta
Your real estate market is over-heated. Everyone is talking about it. People are saying, “Deals are overpriced. Good luck finding anything. The market is too hot to invest.”
And you haven’t found a deal yet. So what do you do?
Don’t get in a hurry.
And don’t give up.
Real estate markets are cyclical. Your market will turn around. It’s your job to be ready and to have the confidence to make your move when it does.
The first thing to remember . . .
Deals Are Still Out There
In any market, up or down, deals are there to be found. You must continue to network and build relationships in any real estate market cycle. Hot or cold. Up or down. If you put your head in the sand and give up your search you risk a number of things:
- You’ll miss deals that come on the market today. Good properties are out there. Motivated sellers come along every day.
- You will completely lose touch with your market.
- Professionals come and go. It’s important to stay in the game so you know who the top players are. And you want those active players to know that you are “in the game.” Let the other guys give up – it just makes for a smaller playing field.
The second most important thing is . . .
Don’t Give Up Your Studies
Education should always be your first priority. Make it a habit to study your market on a regular schedule. Not occasionally. The best way to find real estate deals is to commit a certain amount of time each day and stick with your plan.
Read the real estate news sites and magazines. Look at the properties that are on the market. Run the numbers. How else will you get practice with analysis?
Study, study, study. Meet with your mentors. Network with other real estate investors. Read books. Seasoned real estate investors never stop thinking about real estate. They always keep an eye on their markets, local trends, demographics and economy.
You definitely don’t want to wait until you hear a market has turned around. By the time it becomes public knowledge the ship has already sailed.
- Get on local commercial broker’s e-mail lists and review every listing
- Read real estate investing magazines, blogs and news sites so you know the latest trends in: financing; market sizzle (what rents units); demographics; employment; and jobs
- Keep track of local market rents and concessions
Become a student of your industry. This is the best way to truly become a professional real estate investor.
Become an Expert Real Estate Investor
When I first decided to move out of single-family investing and into multifamily, I invested just over one year in education and training to become proficient. It was a lot of work but also a lot of fun.
During that time I:
- Looked at hundreds of listings on paper
- Went on property tour after property tour
- Met many commercial brokers and other apartment industry professionals (a priceless bonus in hindsight)
- Had a lot of fun picturing myself as an owner of every building I saw
What’s more? I started to get an excellent feel for the local market. In fact I slowly became an expert on:
- Average price per door (a common measurement of price for apartment buildings and larger multifamily properties)
- Types of rental units on the market (such as one bedroom, two bedroom, studio/efficiency, etc.)
- Local market rent and concessions
- Local demographics and natural tenants in the market
- Common amenities
- Ideas for creating ancillary income
- Ideas for tenant retention and what renters want
This really is the short list. By the time I found the perfect property I knew exactly what I wanted to pay for it and how I would operate the property the day I closed.
Adjust Your Strategy
You also have the option of adjusting your strategy by looking for other options within the multifamily asset class. For example you might invest in:
- Smaller multi-units that can be converted to condos at a later time (hint, this might be sooner than you think)
- A good solid “buy and hold” property rather than a property that needs a ton of work today. A turnkey property may provide less yield today than a value add property but value will be there over time.
What I want you to remember is that you can be flexible and stay within the same asset class of real estate.
Forget About Those Bright Shiny Objects
You probably know someone who is always chasing the newest sure-fire way to get rich quick. They jump around from one thing to the next never landing anywhere for long.
Forget about those bright shiny objects.
To succeed in real estate investing you must make a very real commitment and stick with it over the long haul. Choose a path. Have a plan. It’s the only way to find real estate deals and to recognize the difference between a good deal and a marginal one.
Real estate markets are cyclical. Markets repeat themselves over and over. When you have a plan and you commit to sticking around for a while you will succeed.