Deal flow is an issue. The experts and podcasts tell a story of high prices throughout most of the real estate industry. It’s a difficult task to prospect new buying opportunities, and the MLS seems as though it’s an overpriced luxury mall. Cash flow properties are rare needles in a large haystack of overvalued assets. This is not 2013 anymore, when buying a property at a discount was an easy task. But you can’t sit out. That is not a viable strategy for success. Completely sitting out and waiting for a market correction implies that an investor can time markets. That is an impossible task left to fortune tellers.
3 Reasons I’m Still a Buyer in Today’s Real Estate Market
1. It’s important to create a consistent discipline and stick to it.
There are times to be aggressive, and there are times to become defensive. The former is most effective at the bottom of cycles and vice versa for the latter. In downturns, the best investors beat the market by losing less than the next person. Creating a discipline and system that governs principles is vital to success in any investing niche. Know where the area of focus is and master that system. Great investors don’t sit idle on the sidelines waiting; they create opportunity where others see none.
In a previous post, Scott Trench touched on this very well in a thread linked here. He nailed the very core of what the best investors are doing in this market. The crux of his point is what I’ll explain in the rest of this article. This post compelled me to buy his book. As a disclaimer, we do not know each other, and that is not an advertisement for his book, though I do recommend it. It is, however, an endorsement of his thought process and intellect. New investors should follow him because of the insights he offers. This is simply a scenario of giving credit where credit is due.
2. Market cycles exist but can’t be timed perfectly.
We’ve experienced an incredible run for asset values. Warren Buffet’s phrase “be fearful when others are greedy and greedy when others are fearful” is in play right now. There’s a slight sense of euphoria in the markets, and it’s great to see investors thriving. The implication though is that we are closer to the top of a cycle than to the bottom of one. I am still actively looking for properties to purchase, but I’ve tightened my criteria.
With some predictable headwinds on the horizon, it is a time to be defensive—but not a time to sit out. Dollar cost averaging is a real thing. In sync with the previous point, it is important not to accumulate an entire position in one purchase. Dollar cost averaging is an investing principle that dictates a buyer to accumulate a position by making gradual purchases over time. Never bet everything on one price (going all in at once). Prices and appreciation fluctuate. It is impossible to time the stock market perfectly and the same applies to real estate.
3. Nobody knows where prices are going.
In early 2016, the election was considered a done deal. A Clinton administration was going to break up the big banks, and the stock market traded sideways. Fast forward, and a female president still evades this country and deregulation has the banks’ profits doing extremely well. The point here is that predicting the future is not easy. Forecasters tend not to forecast very well. Understand that even the experts make bad predictions, and it is every investor’s responsibility to handle their own funds independent of the external noise.
After my first article, I had an overwhelming response from new investors seeking advice. It was a great experience to offer guidance. A common theme on the calls and emails was a prospective new investor asking advice on how and when to start. My best advice that seemed inevitable with every call was to understand risk and not to bet everything at once. Personally, it took losing everything to realize that I never wanted to risk losing big on one bet. In poker the expression is “chip and a chair”—the idea that if you have money in play there is always the chance to succeed. Always leave yourself chips to use if a single investment goes south.
Are you still buying properties in the current market? Why or why not?