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

by | BiggerPockets.com

You don’t need to be able to time the real estate market to make money.

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 over building. Then there are factors like interest rates, economic policy that impacts jobs, advances in technology, and natural disasters, which are out of our control.

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

Then 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 and how as the market changes. If you are buying with equity or safe amounts of leveraged 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!

About Author

Sterling White

Sterling White started in the real estate industry at a early age back in 2009. The company he co-founded Holdfolio is a real estate crowdfunding platform based in the Indianapolis market. Before founding Holdfolio Sterling and partner Jacob Blackett were involved in the purchasing and selling of 100+ single family homes nationwide. In his free-time he trains for a World Record.

8 Comments

      • Andrew Syrios

        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.

    • 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.

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