It has always been said that the three most crucial things to consider when purchasing investment property are location, location, location! However, location alone is not a guarantee that your real estate investment will be successful. Besides deciding where to invest in real estate, investors should also think about when to invest in real estate. You need to understand what type of housing market you are in- a seller’s market or buyer’s market.
Buying property in a buyer’s or seller’s market comes with a wide range of implications. Let us examine both markets in detail:
What Is a Buyer’s Market?
A buyer’s market happens when supply exceeds demand. This basically means that there are many homes available for sale, but few interested buyers. In this real estate market, property prices are low and homes stay longer on the market. Due to the intense competition, most sellers are open to negotiating offers to avoid losing a sale.
For real estate investors, buyer’s markets are the perfect time to buy an income property since there are fewer buyers to compete with and prices are lower. Since there is less risk of losing a home you are interested in, it would be advisable to take your time. Check out as many comparable properties as possible before making a decision. Knowing what is available on the market will give you leverage when negotiating and enhance the chances of clinching a good real estate deal.
Let’s say you have seen a great four-bedroom investment property for sale with an asking price of $650,000. As you look around the neighborhood, you might discover that there are several similar four-bedroom properties priced at $500,000. You can use this information to negotiate a better deal for the first home.
Another important factor to take note of is the days on market. If a property has been on the market for a long time, you have more power to negotiate for a lower price.
Are you in a buyer’s market? Don’t forget to conduct investment property analysis! To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
What Is a Seller’s Market?
A seller’s market happens when demand exceeds supply. This basically means that the real estate inventory is low and there are many interested buyers. With fewer homes on the market, sellers are at an advantage.
In seller’s markets, buyers are forced to compete with each other in order to secure a home or investment property. Due to the demand, sellers can raise their asking price. Buyers have little power to negotiate and might be compelled to accept properties as-is.
When there is a shortage of property for sale on the market and many interested buyers, time is very important. If you find a suitable investment property in a seller’s market, you need to act very fast. Otherwise, you will find that it isn’t available when you are ready to make an offer. The first thing you need to do is get pre-approved for a mortgage early enough, so the financing will be in place when you need it.
When it comes to making an offer, a seller’s market is the wrong time to insist on repairs, concessions, contingencies, or specific closing dates. If there are some clauses you want to be included in the contract, consider whether they are worth losing the home over. If you are in a position to make a cash offer, do it. Most sellers prefer cash buyers since they don’t have to be concerned about the deal failing due to financing issues.
However, patience is very important in a seller’s market. If you get caught up in bidding wars, you might end up paying more for an investment property than what it is actually worth. Alternatively, you might rush into buying a rental property that won’t produce a good return on investment just because it is cheaper. Take your time, mind your due diligence, and make the right decision.
Seller’s Market or Buyer’s Market: Which Is the Best Choice for 2020?
While it may seem obvious that a buyer’s market is the best time to invest in real estate, the truth is that you should invest regardless of the state of the market as long as you find a good, profitable real estate deal. With the right approach to investment property search, you can find a good deal regardless of the housing market conditions. In fact, Mashvisor’s tools will help you find lucrative investment properties for sale in a seller’s market or buyer’s market.
Finding a Good Real Estate Deal in a Buyer’s or Seller’s Market
- Heatmap Analysis Tool – This tool will show you the most profitable regions for investing in real estate. You can conduct your neighborhood analysis in minutes using these filters; listing price, traditional cash on cash return, Airbnb cash on cash return, traditional rental income, Airbnb rental income, and Airbnb occupancy rate.
- Mashvisor Property Marketplace – This is a one-stop-shop for finding off-market properties such as foreclosures, short sales, and bank-owned properties. You can search for an investment property using filters such as budget, location, rental strategy, and type of property. In addition, you can analyze the investment potential of an investment property for sale based on cash flow, cap rate, cash on cash return, and occupancy rate.
- Investment Property Calculator –Also known as the rental property calculator, this analytical tool will project monthly rental income, estimate monthly rental expenses, and then calculate the cash flow for an income property. Besides cash flow, this tool also calculates the cap rate and cash on cash return for traditional and Airbnb properties. Finally, the investment property calculator will tell you which rental strategy is best suited for your rental home.
When buying an investment property, it is important to understand whether you are in a buyer’s or seller’s market. However, whether it is a seller’s market or buyer’s market, you can still find good real estate deals using the right real estate investment software. Mashvisor tools will provide you with numbers that will help you find cash flowing deals in any US housing market at any time.