Every so often I run across someone who tells me that “NOW” is not the right time to be in real estate, or “NOW” is not the right time to be in commercial real estate, or “NOW” is not the right time to be in (fill in the blank).
The reality is that “NOW” is always the right time because it is the only time we can control. Tomorrow is not promised and yesterday is already a distant memory. No matter what is going on with the economy, I promise you that there are good deals available to you NOW!!
There are always good deals available…ALWAYS. The only variables that you need to focus on are “What”, “Where”, and “Why”.
Here’s my logic…
Profit is a byproduct of commerce. By definition commerce is the buying and selling of goods. The goal is generally to buy low and sell high, but unfortunately sometimes people get it wrong and they buy high and sell low, generally to a savvier investor that is buying low only to sell high at a later point in time. Hopefully that makes sense.
The process of commerce is always being conducted around us non-stop. Someone is ALWAYS buying, someone is ALWAYS selling…ALWAYS!
Now, I know some of you might be thinking, “Khary, no one is buying in my city.” OR “There are no good deals out here because there isn’t enough distressed assets or because it’s too much competition, etc, etc, etc.” But this is simply not true, and here’s why…
A country’s foundation is based upon its currency. Currency derives from the word current, which means to “flow” or “a steady onward movement”. In order for commerce to be conducted, there has to be a steady flow of currency being exchanged between the parties (buyers and sellers). As long as the currency is flowing someone will always be buying and someone will always be selling. If the money stops moving, you better believe there will probably be civil unrest and you will have more important things to worry about then making a profit….like your safety.
So the main variables that you need to focus on when searching for a good deal are:
“Where” – Where is the money flowing to?
“What” – What assets is the money flowing in to?
“Why” – Why is it flowing there?
1.) The first place most people choose to invest in is their own city and chances are good that someone is making money in real estate in your city, regardless of the local economic climate. I know people who are making money in commercial and residential real estate in Detroit as we speak, although the economic climate is pretty dismal. Opportunity is everywhere including your city.
2.) Now that you have found your “Where”, you need to focus on the “What”. What sub-group of real estate has demand in your city. In terms of commercial real estate this could be multi-family housing, office buildings, retail shopping centers, raw land, etc. Generally there will be some type of demand for some type of real estate in your city. It’s your job to find it. If you can’t find it, then you need to go back to #1 and find a new “Where”.
3.) Once you determine the “What” and you have a good idea of what type of property offers the best opportunity, you should immediately be able to support your claims with your “Why”. Why is there a demand for that particular type of property in this location? Is it because of job growth, government incentives, etc. If you can not come up with a legitimate “Why” that is backed up by hard facts, then chances are that you need to reevaluate your “What”. For example, if you feel that there is a demand for rental housing and you think multi-family housing offers a good investment opportunity, then you should be able to support that claim with some hard evidence as to why multi-family housing would be a good investment opportunity. If you can not do that, then you might want to reevaluate your claim and proceed with caution.
In the Washington-Baltimore corridor (the “Where”), there is a growing demand for rental housing (the “What”), because of the Defense Base Closure and Realignment Commission [BRAC] (the “Why”). Several military bases are being closed throughout the country and those military families are being relocated to other bases. Just so happens that several military bases in the Baltimore-Washington area will be the new home of these military families causing an increased demand for housing. Therefore, as a commercial real estate investor focusing on apartment buildings, there is a good possibility that I will be able to find a profitable deal to capitalize on.
I believe that you can always find a good deal by following this simple strategy. Regardless of the economic condition, somebody is making money in real estate in your city, county, state, or country. At any given point in time, somebody is making money. The real questions is…“Are You?”
Comments are always welcomed and encouraged! Let me know your thoughts below in the comment section and feel free to retweet this post on Twitter.