Real Estate News & Commentary

How to Profit From a Hot Real Estate Market (Even if it’s a Bubble)

Expertise: Real Estate Investing Basics, Personal Development, Business Management, Personal Finance
49 Articles Written

Is there another real estate bubble or not? We’ve been debating that a lot lately here on

Here are some of the articles and comments by Ben Leybovich and Brandon Turner, plus a hotly debated Forum thread.

I have enjoyed the discussions, but like in the past, I doubt any of us will correctly pick the top (or bottom) of a bubble. Warren Buffett reminds us:

“The only value of stock [or real estate]forecasters is to make fortune-tellers look good.”

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The future of real estate is even harder to predict than stocks because we have the added difficulty (and advantage) of each local market having its own ups and downs, benefits and weaknesses.

So, given the difficulty of predictions, this isn’t an article about speculation on the future. This article is about the present and how we can profit from it.

Liquidity: The Big Advantage of Today’s Market

If we can’t predict the exact timing of market ups and downs, should we ignore market cycles all together? Not at all. Benefiting from the present and predicting the future are two different things.

The primary reality I see as an advantage in my local market (the upstate of South Carolina) and probably in the rest of the country is simply this:

The market is much more liquid than it was 4-5 years ago. 

I own a small and simple business that primarily holds long-term rentals. I also flip and wholesale properties from time to time. The current state of affairs has some definite advantages for all parts of my business.

When I flip or wholesale properties, it's now much easier to get rid of properties quickly. There are more buyers looking for product, and there are more lenders willing to loan to those buyers. If I can find decent product, I can get rid of it and make money.

Related: The Savvy Buyer’s Guide to Winning Deals in an Seller’s Market

But doesn’t that also mean it’s harder to find the deals because of competition? Sure. But just like in the run-up years of 2003-2007, I can take measures to separate myself from the crowd. My strategy includes:

  1. Hustle, pure and simple
  2. Get narrow and small, instead of big and broad
  3. Use better negotiating skills to my advantage
  4. Go find someone to serve (not to sell to)

Small, nimble investors who hustle like crazy and focus on serving others never have problems finding deals or making a lot of money as a flipper or a wholesaler. Just try it for yourself and see.

Why it Might Be Time to Sell Some Rentals

As a long-term landlord, a liquid market also has definite advantages. First and foremost, I can now sell some of my rentals at retail prices.

I certainly don’t want to sell my best properties just because the market is getting hot. I plan to live off of the growing income streams from my best properties until the cows come home. But selling my losers or less than ideal long-term holds is a way to cull my portfolio and free up time, energy, and capital for better opportunities.

In my business, my partner and I have spent the last couple of years systematically picking and then getting rid of our bad deals from the past. Here are some of the criteria that have helped us find our losers:

  • The neighborhood is bad and not getting any better.
  • The next door neighbor is bad and not getting better.
  • Operating costs are higher than average (e.g. too much lawn maintenance, carpeted floors that require replacing more than hardwoods, large square footage that requires too much paint at each turnover, etc.).
  • Capital Expenses are higher than normal (e.g. expensive roofs with too many lines and angles, large footprints that require more HVAC systems and more plumbing to break, long driveways with excessive maintenance).
  • The property just attracts bad tenants. This could be for some of the reasons above, and it could be because of other issues you can’t fix, like a bad layout.

In several cases we sold our loser property for less than our investment. But the important thing is not whether we lost on this deal or not. The main criteria is what we can do with the cash and the free time and energy that selling this property gives me.

As you work on selling your loser properties, you can also use the liquidity of the market to proactively rearrange and optimize your capital within your portfolio.

Restructure Your Capital While You Can

Unless you’re Dave Ramsey, you’ve probably used debt to build your real estate portfolio. Used safely, I think this is a great strategy because it allows you to expand and get better returns on your beginning capital.

But there comes a time when you should pull back and increase safety instead of maximizing growth. One of the most important parts of my personal wealth building plan is to get a large portion of my portfolio free and clear. Free and clear real estate reduces the risk of your portfolio and reduces your personal stress level so that you can experience the primary purpose of investing: to enjoy your life!

One strategy to get your properties free and clear can be done in any market. It involves amortizing and snowballing debt. You can learn more about this technique from my article (“The Snowball Plan“) and other good ones on BP, such as “How to Create a Million Dollars of Wealth in 13.3 Years ” and “An Aggressive Plan to Pay Off Your Mortgages Faster.”

But a liquid market also gives you another route to free and clear properties. You can strategically sell some properties that have accumulated a lot of equity, pay your tax, and use the balance to pay off debt on remaining properties. I wrote more about this strategy in "The Buy 3, Sell 2 Plan.”

Related: Revealed: The Top 20 U.S. Markets With the Highest Rental Returns

When I use this plan, I typically target selling properties that were bought as short-term holds. These are usually single family house in good locations that were picked up for low prices, often during the downturn. The cash flow is not outstanding on these properties, but we controlled big chunks of equity.

If you also choose to free up equity from some of your properties, it will allow you to simplify your portfolio and your life, as I’ve alluded to above. But even if you don’t want to simplify, you can deploy that capital into other investments that generate better cash flow. Those better opportunities might include:

  • Paying off high-interest debt, either personal or in your business
  • Buying your own seller financing notes at a discount
  • Buying other notes at a discount
  • Loaning money to other investors flipping or renting houses

In all cases here, the theme is to take what the market gives you. If it’s giving you liquidity, take it and figure out how to profit from it.

How Are You Adapting to Today’s Market?

As I’ve said, I don’t know if we’re in a bubble. I doubt anyone else does, either.

It is always prudent to prepare for and hedge against all worst case scenarios, including bubbles. But once you’ve done that, it’s time to go out and ride the waves of whatever conditions we happen to experience in the marketplace. This is how fortunes are built.

So, what strategies are you using to take advantage of today’s market? What are you doing now to increase your own wealth and cash flow?

I’d love to hear from you in the comments below.

Chad Carson is an entrepreneur, writer, and teacher who used real estate investing to reach financial independence before the age of 37. He wrote an Amazon bestselling book
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    Maxim Bovykin from Bothell, Washington
    Replied over 5 years ago
    Chad, thanks for the article! Good stuff for those already holding some properties. what advice can you give to those who are trying to get into the real estate investing in the hot market? thank you!
    Chad Carson Investor from Clemson, SC
    Replied over 5 years ago
    Hey Maxim, Yes, the meat of this article was targeted to those who already had a few properties. I got started in 2003/2004 when it was also heating up in the last upswing so I can appreciate where you are. There are always opportunities, but you have to turn over a few more stones and get a little more creative right now. I have three things in terms of practical advice getting started: 1. I think having a broader array of tools in your acquisition tool box is a competitive advantage. I like using master leases, options, and seller carry-back financing as tools that can control my risk while still letting me be a little more aggressive on price than I would paying cash. I also like non-traditional financing tools like borrowing from self-directed IRAs or other private lenders. These allow me to move faster on deals than bank financing. Those tools will take some learning and work for a brand new investor, but ANY competitive advantage will take learning and work. 2. In very hot markets you can also look for hidden gems that other investors aren’t searching for. You’ve got to go beyond the fixer-upper REO on the MLS. For example, you could focus on flipping land to builders and other speculators. Using the tax records and zoning maps, look for houses that are on larger lots that could be split up or that are zoned for a more dense use. Very often the market value for a residence will be lower than the value of the property converted to the new use. Track down those owners and see if you can buy from them. 3. Finally and most importantly, you just have to be the best hustler on the block. NOTHING is a substitute for this, and in a hot market, cold market, or whatever … I have rarely found that many people who truly hustle like the very best do. Here is an article I wrote on hustle as the #1 acquistion strategy for investors: best of luck!
    Maxim Bovykin from Bothell, Washington
    Replied over 5 years ago
    All great advice, Chad! thank you very much! Deserves a blog post on its own! 🙂 Market is indeed very hot now and creative tools the only option for beginners. thanks!
    Jeff S. Specialist from Portland, OR
    Replied over 5 years ago
    Chad I know exactly what you mean in that some properties just attract bad tenants and some go from being good to going bad. Leading up to the last bubble burst I sold 2 condos and have just held the cash as a great cushion. Borrow when I buy but that liquidity is nice.
    Chad Carson Investor from Clemson, SC
    Replied over 5 years ago
    Yes, I agree Jeff. Sometimes I can explain why a certain property doesn’t attract good tenants and other times it just seems jinxed! If it can’t be fixed, move on! And like you said you get the liquidity that allows you a lot of flexibility or just peace of mind moving forward.
    Ken A. Investor from Lake, Florida
    Replied over 5 years ago
    Single Family homes will continue to go up till 2022-2024. See my blogs. There is way too much demand, less supply, lowest interest rates ever 4%, too much money chasing too few deals, home affordability is still too low.
    Russell Brazil Real Estate Agent from Washington, D.C.
    Replied about 5 years ago
    Ride the wave.