Is it Time to Re-Adjust your Real Estate Investment Strategy?

When real estate investing, like doing any other business venture, you need to be quick to adjust to changing markets, circumstances, and long-term goals. As with most things in life, it is easy to become complacent and accept our given role in the industry, “I flip therefore I am” or “Well, my dad was a landlord so that’s what I must do.” For many, it’s a mindset that dominates their business decisions and goals, but should it be?

For many flippers/rehabbers, perhaps the time to readjust their long-term business practices has come. Don’t get me wrong, I’m not advocating to stop their current endeavors, as flippers/rehabbers contribute greatly to the real estate market as a whole by providing continued stability and community improvements (while hopefully making a profit), but I am suggesting there are many indicators that a volatile, unstable market might yield profits in other realms of the industry.

There are many reasons to believe that a long-term ‘buy and hold’ strategy can pay dividends for real estate investors, particularly cash investors. Although interest rates remained flat this week (due in large part to the European debt crisis developing), it is expected by many financial analysts that rates will increase in the coming quarter. Pair the expected rate increases with more stringent lending practices, the result is a smaller pool of potential buyers (with less buying power). In addition, according to RealtyTrac, foreclosure filings were up for the 2010 1st quarter (up 7 percent from the previous quarter, and up 16 percent from the 2009 1st quarter). As a flipper/rehabber, can you compete with a market increasingly filled with distressed properties? Furthermore, with the lowest U.S. homeownership rates in the last 10 years and no signs of improvement in the near future, there is a need for available housing for renters. With many metropolitan areas, such as Minneapolis, experiencing significant decreases in vacancy rates, it becomes a safer environment for ‘buy and hold’ investors. Ultimately, be thorough in performing due diligence and invest wisely by diversifying your real estate portfolio.

To quote Confucius: “When it is obvious that the goals cannot be reached, don’t adjust the goals, adjust the action steps”.

Photo: bgv23

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.