Real Estate Cycles And Shifting Strategy
Real estate investing is like any other form of investing. There are dips and spikes happening all of the time. There are mini markets and large markets. There are local markets and world markets. So how does the average investor prepare for a downturn or upswing in their farm area when they have so many factors to consider? Keep it simple and focus on cash flow. During a crash, you will see all of the largest cash buyers in your farm area come out of the woodwork to buy as much inventory as they can. They will flip less properties and really look to pick up rentals as they can get them very very cheap. They know the equity before the downturn is about to be sucked out of the properties and values are going to plummet. They know that the cash on cash return for buying cheap rental properties is a safer bet than flipping in a market that is trying to find a bottom. During these times, you will want to put a larger amount of your resources towards acquiring rentals. Once we find the the bottom , you will want to shift back towards flipping. As we swing out of the bottom of a downturn, the market starts to inflate values again so flipping is a better outlook in order to get the best bang for your buck. Rentals start to become less attractive in an upswing because they don't cash flow as well and therefor lose one of their primary functions as long term buy/hold properties. When the market turns in either direction, just shift your strategy a bit. There is nothing to be worried about as long as you adapt.
Ian Walsh
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