The most important rule of real estate investing? Understand your market.
While purchasing a new property or planning to sell are almost always exhilarating, participating in a market that you understand the ins and outs of is a special kind of enthralling. Being knowledgeable about the state of your market gives you a one-up on your competition, allows you to keep your expectations realistic, and empowers you to take advantage of dips and spikes as they come about.
In other words, once you comprehend the game, you can begin to master it.
The easiest way to get familiar with your market is, of course, to gain practical experience. However, if you’re new to real estate investing and looking to make informed decisions about your buying and selling endeavors, hope isn’t lost. Your first step to making smart moves as an investor is recognizing whether or not you’re operating in a competitive market, and understanding how to act accordingly.
What is a competitive real estate market?
Competitive, in this case, means exactly what you think it means—the market is hot, a lot of people are interested in buying, and prices are likely at a high. Competitive markets are frequently referred to as “seller’s markets” because it’s far easier to make a great profit as a seller in a competitive market than it is to get a great deal as a buyer.
How can you recognize whether or not your market is competitive?
While every market is unique, there are a few tell-tale signs that can tip you off to the fact that a market is competitive:
- Low inventory of homes for sale.
- Multiple offers are the norm.
- Homes sell extremely quickly.
- Cash offers become more prevalent.
- Offers frequently include escalation clauses.
- Homes regularly sell at or above their asking prices.
In some cases, even new real estate investors will be able to easily identify signs of a competitive or burgeoning market. In other cases, having relationships with local realtors who are likely to have a finger on the pulse of the local market will prove to be particularly helpful.
Should you invest in a property in a competitive market?
Circumstances vary but in general, yes—buying a home in a competitive market is a great option, if you can acquire the property at a price that still allows you some room to make a profit.
When buying in a competitive market, your choice of financing is even more important than usual. In many cases, working with a private money lender can be a fantastic option because private lending gives you the speed and cash leverage you need to strike while the iron is hot.
If you’re looking for a way to give yourself an edge in your competitive market, get in touch with us! We can provide you with the funds you need to come in with a more competitive down payment or even a cash offer. Click HERE to learn more about our lending options.