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The Best Time of Year to Invest: How to Capitalize on the Holiday Real Estate “Sale”

by Dave Van Horn on December 4, 2013 · 10 comments

  
Best Time of Year to Buy

Thanksgiving just ended and after seeing all the Black Friday and Cyber Monday promotions, we mustn’t forget that real estate is on sale now as well, especially in my market of bread-and-butter homes in the Philadelphia suburbs.  If you’re a serious real estate investor, this just might be your favorite time of year.

More Supply in the Marketplace

Obviously, real estate is a supply and demand equation.  And regardless of what type of market we’re in, there is still a preferred time of year to buy, as well as a down season. So, unless you’re in a vacation area or something, where your best times to buy may be different, where I’m at the real estate market is always busy in the Spring and Fall, a little slower in Summer, and nice and dead from Thanksgiving to the end of January or February.

It makes perfect sense, since this is when there’s the fewest number of owner occupant types of homebuyers in the marketplace. Who wants to move around the holidays? The children are possibly in school, and there’s the fact that it’s just plain cold and nasty outside.

For the most part, people are planning holiday events or shopping for gifts at this time, instead of buying houses. As a real estate investor, this is a great time to swoop in and grab the deals that didn’t sell.

So, What Do I Look For?

Sure, I do some of the same marketing everyone does in the we buy houses business, but most of what I’m talking about today can be found right on your local MLS.  I’m absolutely looking for the handyman specials, the bank owned properties, the possible short sales, etc.  But, I’m also looking for the estates (executors and executrix owners), as well as the POAs (Power of Attorneys, and Administrators).

Banks are usually looking to clear their balance sheet by the end of the year, so they usually have incentive to get properties off their books. A power of Attorney or Administrator of an estate, especially in a nursing home situation, will sell for less, since neither the administrator of the estate nor the property owner will see the money (depletion of assets).

Executors or executrix owners, who need to settle an estate, may also sell for less. There is a time limit for selling assets in order to distribute estates after death, although this may vary on a case to case and state to state basis.

A distressed seller will be more willing to give you a great deal. And, being able to close quickly with cash or private money is a great way to satisfy those trying to sell before year’s end. Win-Win!

And, How Do I Buy?

Even if I’m trying to buy with financing, other favorites of mine are expired listings, those that just relisted, or properties with a long DOM (days on the market).  And, I’m certain to ask for the sellers assist.

Many realtors avoid this, but as an active buyer, I want a seller assist on just about every property that I buy.  It’s a great way to indirectly finance some closing costs (by keeping it in rather than reducing the price) and actually end up with more tax write off (by financing a little more). It can also contribute to a higher ROI (Return on Investment), since there’s less cash out of pocket required to purchase the property, thus giving the higher yield.

Once you get it off the market, you can let the other third-party inspections work to your advantage to get you some repairs done or at least some repair credits.

Buying a property right now is also a great way to keep my contractors busy throughout the winter, and I can often get work done a little cheaper than in the busy construction season. So, I’m effectively saving money in the process.

If tis the season for you to be buying real estate as well, I’m curious as to what you’re looking for. What types of strategies are you employing at this time of year?

I’m not as familiar with other locations, so if you’re from another area, when’s your best time to buy?

Photo Credit: Glenn Waters ぐれんin Japan.

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{ 10 comments… read them below or add one }

melodee lucido December 4, 2013 at 12:41 pm

Dave,
Good article! Yes, this is a great time of year—my rei fav. It’s about the mindset of the sellers. They just want to get IT done.

I’m marketing big time right now to long DOMs, expireds and OOA owners as well as my driving for dollars finds. What doesn’t go right now will have a more of a chance after a few more loooong coooold Winter months and several letters/postcards : >

Thanks for the article!

Reply

Dave Van Horn December 4, 2013 at 2:38 pm

Hi Melodee,
Thanks for the positive feedback! I agree–it definitely is the mindset of the seller, especially at this time of the year when activity slows and the seller becomes anxious. Time becomes a force in your negotiations, and this could result in more favorable terms as well.
Happy hunting!
Dave

Reply

Luis Giraldo December 4, 2013 at 12:57 pm

Forgive my ignorance Dave, but what is sellers assist?
Thank you for the great input throughout the year- as a student of REI I’ve been eating up great bits of info from your posts and especially enjoyed your notes interview on the podcast. Happy Investing!

-Luis

Reply

Dave Van Horn December 5, 2013 at 11:17 am

Hi Luis,

Thank you—I’m glad you enjoyed the notes and podcast! That’s actually a pretty common question.

A seller’s assist is a percentage of the sales price (not less than the appraised value), which can be contributed to the buyer’s closing costs (usually 3-6%). Although the amount is dictated by the lender/seller, it can cover prepaid items and transfer tax.

It’s actually a good strategy for an investor trying to buy a property. Even if you’re borrowing at a higher amount than without a seller assist, it still provides a higher rate of return by, in essence, allowing you to finance your closing costs. For example, it can be better for the investor to buy a property at 100K with a 6% assist than to buy it at 94K without an assist, as long as it still has a positive cash flow. In this case, there’s less cash in on the deal and a higher mortgage interest deduction. This also enables the opportunity for renegotiation if the appraisal comes in lower.

I hope some of this helps!
Dave

Reply

Adrian December 4, 2013 at 1:00 pm

Good article Dave, I’ve currently got an offer in on a short sale (for a personal residence though – but still an investment if it’s the right price!).

Reply

Dave Van Horn December 5, 2013 at 9:33 am

Thanks Adrian! I hope the short sale (feels more like a long sale sometimes) goes through for you!

Reply

Roy Schauer December 5, 2013 at 8:35 am

We keep looking for deals to. Have made 5 offers in the last two weeks. But it is slowing here, we are in Alaska and has been running -10 to 5 degrees lately. One of the things we are doing since its slower is to realign our processes. Take stock of what worked, and what didn’t, look at streamlining processes with the goal of collapsing time. Also we have been really pushing the networking. Building the connections and increasing awareness in the community of what we do. Trying to stage ourselves to hit the ground running when spring rolls into place. 2014 will be our year of growth.

Reply

Dave Van Horn December 5, 2013 at 11:20 am

Hi Roy,

I appreciate you sharing. Although we own notes in Alaska, I’m not too familiar with your slow/busy seasons. Are your deals primarily in state? And, how long is your typical down season there? It sounds like you’re making some smart steps during the down season to streamline processes, and I completely agree on the networking front. It’s a great way to increase awareness and promote growth, that way you’re fresh in people’s minds when the market picks up.

Best,
Dave

Reply

Roy Schauer December 5, 2013 at 3:34 pm

Thank you for the reaponse. At this time we are mainly dealing locally. As our knowledge increases and systems get locked in we’ll expand to other areas. Ultimately would like to get into the note arena. Technically the down season is about 5 months. But we also do snow plowing to generate revenue during the winter months.

Reply

Dave Van Horn December 6, 2013 at 3:14 pm

I started with local deals as well. The notes arena may be a good fit for you, since the business can really be done from anywhere (not impacted much by weather conditions). Let me know if you have any questions–I’m always happy to help fellow BP members learn more about notes!

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