Professionals in the industry understand the four market phases:
- recovery
- expansion
- hyper-supply
- and recession.
Your awareness of the signs that point towards the beginning of an up or down real estate cycle ultimately determines your potential profits.
In addition to the state of the real estate market and the supply of available housing and interest rates, external factors also strongly influence.
For example, the pandemic affected the market cycle and real estate trends; as buyers refocused on more home-based lifestyles and less populated lodging options when traveling, savvy investors moved towards offering short-term lodging on sites like Airbnb.
Real estate investing is a business; you must approach it as such, understanding that research is a significant part of the job. You must familiarize yourself with the signs that tell you when to act because timing is critical for investors to maintain a healthy portfolio, despite the current real estate cycle.
As an investor in the Triangle real estate, you must be diligent and adjust your strategy as you watch these indicators to achieve long-term success. Navigating the inevitable real estate market changes with a thorough understanding of the cycles allows you to profit. Keep reading as we explore how to make money during up cycles and down cycles as an investor in current market.
Expansion
During periods of economic growth, demand for housing outpaces the supply, and the construction industry is benefiting from new housing starts. As a result, rental rates increase during this phase as it is difficult to secure space.
To make money during this cycle as an investor, you should focus on developing or redeveloping properties to sell for higher than market value. The easiest way to make money during up cycles and down cycles is by working with professional investors like TLC Estate to make the highest returns on your investments.
Pros of investing during an expansion cycle:
- Increased Demand: During an expansion cycle, demand for real estate is high, which can lead to an increase in property prices.
- Higher Rental Income: As the economy grows and demand for real estate increases, rental income from properties can also increase, providing a steady stream of income for the investor.
- Improved Financing Options: During an expansion cycle, financing options for real estate investments may be more favorable, as banks and other lenders are more willing to lend money.
Cons of investing during an expansion cycle:
- Competition: During an expansion cycle, there may be increased competition among investors for properties, which can drive up prices and make it more difficult to find a good deal.
- Higher Interest Rates: During an expansion cycle, interest rates may be higher, making it more expensive to finance real estate investments.
- Overvaluation: During an expansion cycle, some markets may become overvalued, which can result in a market correction and a decrease in property values.
Special Risks:
- Market Correction: During an expansion cycle, the real estate market can become overheated, which can result in a market correction. This can lead to a decrease in property values and a loss for the investor.
- Economic Downturn: An expansion cycle can be disrupted by an economic downturn, which can lead to a decrease in demand for real estate and a decrease in property values.
- Interest Rate Changes: Changes in interest rates can have a significant impact on real estate values and investment returns. During an expansion cycle, interest rates may increase, making it more expensive to finance real estate investments.
Overall, investing in real estate during an expansion cycle can be a good opportunity to generate profits, but it also comes with certain risks and challenges. It’s important to carefully consider your investment goals, risk tolerance, and financial situation before making any real estate investments.
Hyper Supply
Eventually, the expansion efforts reach a breaking point, and supply will exceed the demand, or a shift in the economy causes a retreat in the demand for housing. While others may act in fear and liquidate their holdings, wise investors will buy and hold at this time to make money during this cycle as an investor.
Oversupply of properties on the market can lead to a decrease in property values and a decline in rental income. Investors during this time can make several mistakes that can negatively impact their investment returns:
- Overpaying for Properties: During a hyper-supply cycle, investors may be tempted to overpay for properties in an effort to secure a deal. However, overpaying for a property can result in a negative return on investment.
- Failing to Consider Market Conditions: Investors may ignore market conditions and purchase properties without considering the impact of oversupply on property values.
- Not Properly Assessing the Condition of Properties: During a hyper-supply cycle, properties may be in disrepair or in need of renovations, and investors may overlook these issues, which can lead to additional costs and lower returns on investment.
- Neglecting Due Diligence: Investors may neglect to conduct proper due diligence when purchasing properties, such as failing to obtain property inspections or failing to thoroughly review financial statements.
- Ignoring Location: Investors may overlook the importance of location when investing in real estate during a hyper-supply cycle. Properties in declining or economically challenged areas may be particularly vulnerable to declining property values.
- Not Diversifying Investments: Investors may concentrate all of their investments in a single property or market, which can increase their risk in the event of a market downturn.
By avoiding these common mistakes, you can reduce your risk and increase the chances of success when investing in real estate during a hyper-supply cycle. It’s important to carefully consider market conditions, conduct thorough due diligence, and diversify investments to mitigate risk and maximize returns.
You must find properties that will perform well over the long term, taking advantage of this period to capture future equity in investment properties. Over the years, we have built connections with the most highly regarded pros in the industry to quickly assess potential investment properties and handle everything from the appraisal to complete rehabs.
Recession
When the supply far outweighs the demand for housing, the market enters the recessionary period, and vacancies steadily rise. As a result, landlords may offer reduced rental rates to attract tenants. Because real estate is cyclical, To make money during this cycle as an investor in Raleigh, Durham, Clayton, Smithfield, Rocky Mount, Selma, Wilson, Goldsboro, Kinston, investors should set aside funds for recessionary periods to take advantage of deep discounts on an abundance of properties. Seasoned investors understand the potential profits in retaining their holdings as the cycles of real estate continue and cash in during the next phase, recovery.
Recovery
An upswing in the economy doesn’t always announce itself with blaring trumpets, so investors must keep a close eye on the many factors that influence real estate cycles.
The signs investors that denote the beginning of a recovery phase are an uptick in employment numbers along with a more positive overall public sentiment about the economy and an increase in consumer spending.
The business community should match this overall outlook in their view of the economy and expansion, an uptick in employment numbers. In addition, banks are more willing to lend at this time, and national shipping activity increased by rising consumer spending. Therefore, to make money during the recovery cycle as an investor, you should be paying close attention and be ready to purchase properties at discounts and hold to sell or rent during the next phase, expansion.
Investing with investors like us makes the entire process super easy.
Let the experts at TLC Estate help you make money during up and down cycles as an investor in your desired market.
While TLC Estate’s focus remains well-timed, well-placed multifamily acquisitions in core-plus markets, and the exceptional development and management thereof, it continues to invest in urban infill, adaptive reuse and rehabilitative development strategies as complementary and most often synergistic supplement to its core competencies. The financial returns resulting from strategic acquisitions, along with the company’s commitment to projects that attract ripple effect growth has strengthened relationships with capital partners who hold the same vision.
We are committed to helping people with their real estate needs and making successful deals happen. Placing people before profits, and continuing to invest not only in property, but also in the surrounding neighborhoods and beyond.
Working with professional investors at TLC Estate, from locating excellent investment opportunities to partial or full-service property management, means you can rest easy knowing your holdings are in good hands.
Call TLC Estate at 919-608-6579.