Housing cycle's effect on learning.

[Mark Harris]

Hi All,

I'm currently extremely hesitant to enter the RE game after having heard "it's a seller's market" multiple times. As a learning investor focused on cash-flow, I'd like to know how you all feel the market cycle may affect my learning process in terms of "expensive" lessons.

wisdomize me!

[David Faulkner]

You can make money in RE in any market and any point in the cycle ... the key is choosing the appropriate strategy. If you learn multiple strategies, and how to run the numbers on a deal from these different angles, the numbers will tell you which way to go ... buy-and-hold, flip it, wholesale it, walk, etc.

In general, the hotter the RE market is, the larger the market risk, and the shorter the holding period for investments. For example, in SoCal 2009-2012 was great for buy-and-hold (long holding period), then those margins got too thin and 2012-2014 flipping made more sense (short holding period), 2014 to today flipping numbers are fairly thin so I'd consider wholeselling or acting as a RE agent or other RE services (zero holding period).

So, to summarize, in a dynamic market like CA you have to either be very patient or learn how to operate different strategies, adjust, and adapt along with the market. Never compromise your standards, though ... no deal is better than a bad one.

Finally, for a newbie, I think a down market (think 2009-2012) is the easiest (but scariest) time to start and it may be useful to be self aware that your emotions may lead you astray ... as Buffet recommends, be greedy when others are fearful and fearful when others are greedy ... easier said than done, but good advice none the less. Good luck!