Real estate and Timing

Timing is the art of taking actions when circumstances are best suited for a positive outcome. An astute real estate investor keeps abreast of the events that effect his investment.

What is the current political climate?
What events are happening in your local market?
What is the state of current interest rates?
What is the general consensus towards real estate investing, is it a sellers or buyers market?
What are the alternative investment rates of return?
What is the supply of like kind space over built or is there shortage?
What is inflation doing? Where is the population growth in your area headed?
What is the job market like?
Are you likely to get top price now or in the future?
Should you be buying, holding or selling?

All of these consideration and others particular to your local area or property will effect your determination as to when to buy or sell for best advantage. The process is called timing. Let me pick one of the considerations; “What is the state of current interest rates?”
If interest rates on commercial (investor) loans is high, a buyer will want a higher cap rate to offset the higher interest payments. That means a lower price from you (the higher the cap rate, the lower the price in relation to the properties net income). If interest rates are low you will be able to sell your property at a lower cap rate and thus a higher price. Interest rate timing effects the price that you can sell your peoperty at.

There is one way around high interest rates, if you can afford to finance the buyer, you could hold the note until interest rates go back down. That would allow you to get top dollar for your property. If you need cash you can borrow against the note at your bank. If rates go down below the rate you charged your buyer, you might even sell the note at a premium.

As I write this in February 2010 the real estate market is a mess, financing is very tight and buyers are scarce. This my friend is a buyers market extraordinar. Today I am a buyer. In 2007 I was a net seller liquidation holdings at the top of the market. The last up market lasted for some fifteen years, peaking in 2006 -2007 and this down market will start back up in 2012 if history is the indicator. In five years all us buyers will look like investment heroes.

You buy when everyone is saying no way and you sell when everyone wants in. In 1982 interest rates paid on C.D.'s was 16% and mortgages where at 20%. No one could sell anything. I bought three houses that year all owner carry notes at 10% with very small down payments. Why? Because if no one can sell, because there is no buyers, then they have to sell to me or keep holding the property.

I can make money in any market good or bad because I am flexible.

Example one: It's a down real estate market so banks are holding foreclosures and most of the properties need repairs. They can sell to cash buyers or they can sell to you and carry the note with say 15% down because there are few buyers at all cash that you can get in if you look hard enough for the flexible lenders.

Example two: In a good market I know that if I find a property with potential that needs a little TLC, I will be able to rehabilitate the property and raise rents, then re-sell at a profit into a strong sellers market. There are always property that are neglected or mismanaged that can be had a t bargain prices.