by Theresa Bradley-Banta
One of the most devastating discoveries to make in real estate investing is that you’ve bought your property at the wrong time, in the wrong market, or both.
Obviously you don’t want to wait until you own a property to take an interest in your market.
Makes sense right?
When you hear or read about a stock that’s skyrocketed in price, it’s usually too late to get in on the action. The money is already in the savvy investor’s bank.
The same is true in real estate investing.
Is a Highly Ranked Market a Good Bet?
I love to read national apartment ranking lists. I also know that they can be misleading—at best. Just as in the stock market, when a real estate investment market hits the top of the list you might be too late to the party.
Don’t be too quick to take action. This article shows you how to follow the news and research—allowing you to make smart and timely investment decisions.
Do Your Homework
I’ve been tracking the Denver, Colorado apartment, multifamily and single-family real estate market (among others) for over 10 years. Here’s an interesting timeline covering the multifamily market in Denver:
- In 2004 the market was beginning to stabilize (from the 2002-03 recession).
- In 2007 deals could be had at prices that will most likely never be seen again.
- In 2010 only the gutsy, brave and/or really smart investors were scooping up properties at similar prices to 2007 amid cries of “Put your money on the sidelines during the Great Recession!”
- In 2014 the Denver apartment market is ranked #3.
Your job: In addition to studying current market data, start reading historical news coverage and reports for any investment market you are considering.
Denver Multifamily Market in the 2014 News:
Here’s what you’ll read about Denver today:
Marcus and Millichap ranks Denver #3 in its 2014 National Apartment Report. “Denver employment will rise at one of the fastest paces in the nation this year, supporting housing demand as a wave of new inventory comes online.”
“Metro Denver ranks No. 6 in Forbes’ 2014 list of fastest-growing cities (up from No. 16 on the 2013 list).” — Denver Business Journal Feb. 2014
“Top 10 Metros With Most Units Under Construction: Denver ranks #8 with 11,556 units under construction.” — Multifamily Executive Feb. 2014
“Denver’s commercial real estate market ranks at No. 11 among 2014 Markets to Watch nationwide.” — Denver Business Journals Jan. 2014
When you read this upbeat news, you might think that now is the best time to buy. Denver is a great market and should be for the next several years.
But good luck finding a property that isn’t over-priced—or at least not at the prices you could have paid during the Great Recession (and before). You always want to follow the cardinal rule of real estate investing—make your money on the front end of the deal.
So, When Is a Good Time to Invest in Apartment Buildings?
Let’s take a look at the Denver news and reports over the past ten years:
“The apartment market will likely continue to stabilize through 2004 and well into 2005… Over the long term Denver is an excellent market for apartment investment and development.” — James Real Estate Services 4Q 2004 Apartment Perspective
“At least one business success story has risen from the ashes of the subprime mortgage meltdown and capital crunch — an improving apartment rental market in Colorado.” — Apartment Realty Advisors Aug. 2008
“Despite a continually battered economy, the major indices driving the multifamily sector look very bright.” — Grubb and Ellis 4Q 2009
“Vacancy rates for Denver-area apartments keep falling.” — Denver Post May 2010
If you had invested in Denver in 2007, or even several years before or after, you would have been a very happy real estate investor in 2014!
You want to buy when real estate market cycles are moving out of Recession and into Recovery (decreasing vacancy rates and low new construction).
You’ve missed your best opportunity if you wait to invest in a market that has moved into Expansion (high new construction and high rental rates) and Hypersupply (increasing vacancy rates and low absorption of new construction).
There is No Bad Time to Pick Up a Good Deal in a Solid Market
There are always opportunities to buy properties at a reasonable price. In a hot market you’re job becomes more difficult. The volume of deals you must look at increases. One of my broker’s calls these “rifle shot” deals: they’re harder to find.
It’s always possible to find motivated sellers in any market. For example, you might find sellers that are desperate to sell quickly, or are retiring and getting out of the investment business—both are likely to be open to negotiation.
Don’t lose hope. Good deals are out there.
Start Researching Real Estate Markets Today
The resources for real estate market research are endless. Download A Checklist for Researching Real Estate Markets for links to 20 online resources.
Start a library. I’ve saved reports and news on national apartment markets for the past decade.
Contact us for a discussion about investment markets you might be considering.