The real estate market can be characterized by 4 phases. Here I will breakdown each stage in the attempts to help us all become more savy investors.
Phase #1 - Recovery
- characterized by high vacancy rates and no new construction
- rent, during this phase, is flat or declining
- owners offer rent concessions to avoid their property occupancy rate from declining
Phase #2 - Expansions
- characterized by declining vacancy and the start of new construction
- occupancy improves, concessions are not being offered, and rental rates being to grow
Phase #3 - Hyper Supply
- characterized by new construction and vacancy rates beginning to rise
- rental rates begin to grow at a slow rate
- rent concession are being offerred due to the new construction in the area [in the hope of retaining current renters]
Phase #4 - Recession
- characterized by the completion of construction and a decline in occupancy rates
- concessions are abundant to avoid high move-out rates
Here are some foundational truths about optimizing your investments:
#1 sow seeds of success in the down times - "The season of failure is the best time for sowing seeds of success." Warren Buffet.
Those who buy when everyone is selling usually becomes the big winners. Individuals who bought real estate during a recession have seen their property values and cash flow nearly triple.
#2 avoid sowing seeds of failure in the good times - Many investors fail due to investing in prosperous markets. They do this by foolishly assuming the good times will last forever and fail to remember the market cycles.
By keeping these principles in mind, you can optimize your position in the market. To learn more about these principles, connect with me.
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