Real Estate Investing Basics

Why You Don’t Need to Time the Market to Make Money in Real Estate

Expertise: Commercial Real Estate, Personal Finance, Real Estate Marketing, Business Management, Landlording & Rental Properties, Real Estate Investing Basics, Personal Development, Real Estate News & Commentary, Mortgages & Creative Financing
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You don’t need to be able to time the real estate market to make money.

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There is a lot of talk and concern about being able to time real estate moves to invest safely and profitably. It’s really hard to do, unless you control the market. Fortunately, some of the most notable, admired, and successful real estate investors swear that you shouldn’t try to time the market at all.

The Challenges of Trying to Time the Market

Most are driven to try and time the market, to pinpoint the best moment to buy and sell. Still, there are many challenges to timing the market. Just look at the percentage of investors and banks that fell in 2008. Very, very few made it. They failed to time the market.

It’s hard to do for many reasons. First, there are so many factors involved. We can see some of the very visible common-sense signs ourselves, like affordability and overbuilding. Then, there are factors like interest rates, economic policy that impacts jobs, advances in technology, natural disasters, and worldwide pandemics, which are out of our control.



Related: 4 Things to Understand BEFORE Investing in Markets with Declining Populations

Also, there is the media and statistics, which are now so easily manipulated, lagging behind current trends, or just flawed. You can’t just listen to the news or watch what your favorite investors are doing. By the time it is announced, it’s history. You’ve either missed the best time to buy or sell.

Why You Don’t Need to Time the Market

Ironically, even Warren Buffett says investors shouldn’t try to time the market. That’s a strategy he gleaned from his mentor Benjamin Graham, “The Intelligent Investor.” He believed in consistent investing or “dollar cost averaging”—meaning the best way to invest is just to keep doing it. Invest, invest, invest. Sometimes, you’ll be investing at the bottom or top. Over time, you will still maintain the best results.

What is important is that you keep investing and that you pay attention to the numbers of each individual opportunity. Of course, you aren’t going to try to flip a house if you are buying at the top of the market, and selling is challenging and prices are declining. That’s just financial suicide.

Compare that strategy with acquiring buy and hold income properties with equity, which can provide you cash flow, month in and month out, regardless of national home prices. This makes it unnecessary to try and time the market and will likely deliver the best long-term results.

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Related: 4 Actionable Ways to Find Real Estate Deals, Even in a Red Hot Market

Summary

Oftentimes, the people who decide to “time the market” end up on the sidelines with excuses. There is plenty of opportunity out in the market at this present moment. Still, there are some who have bought properties speculatively over the last few years and may need to think about what they are holding as the market changes.

The point is, if you are buying with equity or safe amounts of leverage and you are acquiring cash flow-producing properties for the long haul, then that mitigates your overall risk.

Do you look for cues in the market to time your investments most profitably?

Let me know your thoughts with a comment!

Sterling is an multifamily investor specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling w...
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    Andrew Syrios Residential Real Estate Investor from Kansas City, MO
    Replied about 3 years ago
    timing the market is not something you can rely on. That being said, in the middle of a recession is definitely the time to buy on the cheap.
    Gil Flmeinga from Fresno, California
    Replied about 3 years ago
    Yes, if you are well positioned, you can scoop up properties.
    Andrew Syrios Residential Real Estate Investor from Kansas City, MO
    Replied about 3 years ago
    One of important reasons to keep your liquidity high (if possible) and build wide networks of banks and private lenders. The better positioned you are for the inevitable recession, the better position you are in to scoop up said properties.
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied about 3 years ago
    Well said, Andrew! Do you see an opportunity coming soon to implement your above strategy?
    Kurt
    Replied about 3 years ago
    It is not necessary to pinpoint the exact month or even year. Although technically recessions may only last for months, the effect on Real Estate prices can linger for years. Say you had bought any time between 2009-2012, you would probably be very happy by now even if you didn’t buy at the very bottom. The problem is these good times to buy (bad times economically) have such a long time in between that it may not be worth the wait. Waiting 10 years during which prices increase 5% per year, for a 15% decline, for example probably won’t be worth it.
    James W. from Jersey City, New Jersey
    Replied about 3 years ago
    Swing trading. Keep buying deals that are 30% lower in any market and keep selling them as fast as you can. Works in theory atleast.
    Jeff Sheraton from Wilmington, Delaware
    Replied about 3 years ago
    “Don’t want to buy real estate, buy real estate and wait.”
    Sterling White Rental Property Investor from Indianapolis, IN
    Replied about 3 years ago
    Agreed!
    Jeff Sheraton from Wilmington, Delaware
    Replied about 3 years ago
    “Don’t want to buy real estate, buy real estate and wait.”
    Vaughn K. from Seattle, WA
    Replied about 1 month ago
    People always make it out like it's on/off, black/white, buy/sell... To me it's more gray zone. There are times, like a few years leading up to 2008 that were obviously overinflated, and the first few years into the Great Recession where it was clearly a good time to buy. In those you may wish to slow down or speed up, change criteria where you're only taking home run deals in the high price times for instance, or snapping up marginal deals (for the time) because you know you're at a major low. That kind of thing. It's impossible to time the EXACT top and bottom of the market, but people who say you can't tell when we're closer or farther away from the top and bottom are fools. No matter what Buffett says he STILL piled up way more cash as markets got too high, and magically spent when they went down. He didn't ever stop fully, just adjusted how hard his foot was on the gas pedal. That's what I advocate.
    John Manner
    Replied about 1 month ago
    Don't try to time the market and real estate is also the most forgiving (long term) investment.