Why Studying the Market Can Help You Avoid Disaster

I had a very informative conversation with Shannon Rose, who has been a real estate investor and a CFO of a venture capital firm in the past, but has transitioned to being a real estate agent. During her time as an investor, she had many personal growth experiences and made some mistakes, which she was willing to share in order to help other investors to not fall into these same traps. Shannon’s best advice ever is that “you have to study and investigate the market” if you want to be a successful real estate investor.

Before the market crashed, Shannon was an active real estate investor, consistently purchasing 2 residential buy-and-hold properties a year. At the same time, she had other colleagues that were purchasing properties at a much higher rate, some buying as many as 5 short sales a day. Shannon understands that 2 properties per year may be too fast of a pace for some, and too slow of a pace for others, but she believes that regardless of your pace, it is possible to spread yourself too thin. Therefore, it is really important to make sound, savvy investments and to not have too much of your own skin in the game.

When the market reached it’s peak, Shannon decided that it was a good time to sell off all of her properties. 18 months later, the market crashed, and her colleagues that were buying 5 properties per day ended up having to give many properties back to the bank, which resulted in their credit taking a beating and having multiple short sales under their belts. Shannon is very fortunate that she was able to sell off her properties when she personally thought that the market was at its height and beginning a downward spiral. Not only did she avoid facing the negative ramifications that many investors at the time faced, but she was able to get out with a few great success and some smaller ones as well.

Shannon didn’t have a crystal ball that told her that the market was going to crash. Instead, she was aware of the economic indicators that were pointing to the crash a few years in advance because she spent the time studying the market before she began purchasing properties. Many people make the mistake of wanting to just jump straight into investing because it sounds super sexy to buy something and make a ton of money off of it. However, you have to buy savvy and smart, as well as make sound decisions based off your investigation of the entire economic spectrum and what is going on in the local market.

Now, most of us don’t have the time to spend days looking at economic data, so Shannon provided me with a tip on how to quickly determine the market conditions:

Be aware of where the big companies are going.

Pretty simple! If a large company is moving into an area, they have already done a ton of economic research and selected that specific market based off those results. If a company is committed to coming into a market and the surrounding real estate is at a lower price point, then it is likely that those same properties will be on an upward swing 5 to 7 years from now.