Prior to buying an investment property, it is essential to pick a potentially successful real estate market for your income properties. Besides checking property listings and conducting investment property analysis, it is of key importance to define the state of the market. The latter actually means to define if it is a buyer’s market or seller’s market. Many professionals of conducting real estate market research state that nobody can be absolutely certain if the local housing market is a buyer’s market or seller’s market. The reason behind this is simple. Even though on paper real estate market analysis can indicate whether the local housing market is a buyer’s market or seller’s market, that almost never is the case in real life. Typically, the properties for sale and the operating investment properties, as well as the supply and demand relationship in the market, lean more towards one of the market’s state. However, when conducting real estate market research, we can find some characteristics of the other market condition as well.
In this blog, we will review what each of the market conditions is. Moreover, we will show you a way you can tell if the local housing market is a buyer’s market or seller’s market.
#1 Buyer’s Market or Seller’s Market: What Is a Buyer’s Market?
A buyer’s market occurs in a situation in which the supply exceeds the demand for a certain product. In real estate, this means that the supply of real estate properties is higher than the demand. When this happens, the prices of investment properties go down due to the fact that there are not many real estate investors interested in financing income properties on the market. Buying an investment property in such a situation might turn out to be a great financial decision. Of course, when you are doing a property search, make sure to choose types of property which bring the opportunity for future growth and development of your real estate business.
In the state of a buyer’s market, as previously mentioned, the real estate properties decrease in value. Additionally, the properties for sale stay on the market for longer periods of time. Consequently, the competition between the sellers increases. In order to be a worthy rival, a seller needs to constantly adjust the asking price of his/her properties for sale and, in most cases, lower it.
There are various cases which can lead the real estate market to this condition. For instance, a crash in the market, a problem with the local economy/ job opportunities, etc. might cause a real estate market to become a buyer’s one. Curious as to what are the best buyer’s markets right now? Make sure to read “These Buyer’s Markets are the Best Markets to Invest in Right Now.”
#2 Buyer’s Market or Seller’s Market: What Is a Seller’s Market?
A seller’s market is the opposite condition. This means that a seller’s market is a condition in which the property listings are less than the demand for investing in real estate properties. Therefore, the prices of income properties grow. As you can imagine the latter means that the market favors the sellers. Thus, to buy a rental property in this real estate market might be quite costly. However, if you have investment properties to sell, this might be the perfect opportunity to do so. Sure enough, certain types of property might be more profitable than others. It all depends on the property search and preference of the potential buyers of rental properties.
There are other characteristics of the real estate market when in the state of a seller’s market as well. This time, the competition is between the buyers rather than the sellers. This is simply because there is a limit of property listings. At the same time, there are many house investors interested in buying an investment property at the specific location. This means that investors are trying to get to the potential rental properties first and offer the best price in order to get the investment. Besides that, the properties stay listed for sale for a fairly small period. Shortly after, they are bought and transformed into rental properties, for example.
However, when you buy a rental property, you probably want to know if it is a buyer’s market or seller’s market. Now, we will explore how to determine that and to easily establish the difference between the two. Interested to know if you can invest in real estate even if it is a seller’s market? Make sure to read “It’s a Seller’s Market But You Can Still Invest in Real Estate.”
#3 Buyer’s Market or Seller’s Market: How to Tell the Difference
Before conducting investment property analysis in order to buy a rental property with a great chance to prosper, you need to conduct real estate market analysis. Conducting real estate market research will help you in exploring the market in depth. In addition, real estate market analysis will help you in defining whether it is a buyer’s market or seller’s market at the current moment. So, how can you know if it is a buyer’s market or seller’s market?
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Get Familiar with the Local Market
You certainly need to know what you are getting yourself into. The latter includes being familiar with the local housing market and getting informed about everything new happening there. Nowadays, with one click on the web, you can access all the information you want. Further, you can go and ask around, observe for yourself, read the local newspapers, etc. The more knowledge and data you have gathered, the better investment decision you will make.
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Use the Rental Property Calculator
The rental property calculator is a great real estate investing tool which can help you in conducting real estate market analysis. Consequently, the tool can be tremendously helpful in discovering the condition of the market. Mashvisor’s rental property calculator, for instance, can give you detailed information about the market in general and the specific area you have chosen for your investment. As a bonus, the tool can help you in performing investment property analysis as well and, thus, make your property search easy. Interested to learn more about the rental property calculator? Make sure to read “The Rental Property Calculator: A Tool for Both Real Estate Investors and Real Estate Agents.”
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