The real estate market is cyclical. As such, you should adapt your investment strategy for each real estate market that may arise. You strategy for a “seller’s” real estate market should be different from your investment strategy for a “buyer’s” real estate market. You have to know the current real estate trends, the current lending trends, and the current market as a whole if you want to continue to make money through real estate investment.
In order to adapt and compete with the changing real estate markets, you have to educate yourself as to the different investment strategies that exist and when to apply such strategies. Read books, take a class, or do whatever you have to in order to obtain the information you need to successfully invest in different real estate markets.
It is important to keep your core investment strategy in place even when the different real estate markets emerge. For example, if you like to buy, hold, and rent, you might not want to start flipping houses just because the rental market is soft. Instead, you may want to work on improving your current properties so that they stay attractive and competitive in the rental market. Also, you may want to try to refinance any loan on the property to see if you can decrease your current mortgage payment.
On the other hand, if you flip houses and there are few buyers in the market, you may want to negotiate lower purchase prices or consider renting out your flips depending on how soft the market really is. The point is, you have to have a contingency plan and be ready to adapt if your primary investment strategy needs to change. You can keep the core strategy, but the execution of your plan may have to change.
In addition with staying up to date on current investment strategies and market conditions, it is vitally important that you stay current on lending trends. It is important to stay current on lending trends because the current status of bank lending plays a large part in whether people can afford to purchase a property. If they cannot purchase due to tight bank lending, your property may sit on the market for a long time. Additionally, this may mean that there are more renters in the market.
Finally, pay attention to employment trends. If unemployment is high, your tenants may start defaulting on their lease. This may leave you with several mortgage payments. As such, plan accordingly and keep some sort of cash reserve.
Remember, educate yourself whenever possible on different investment strategies. Stay current on lending trends and employment trends. By educating yourself and staying current on these trends, you should be able to adapt and stay competitive in any real estate market.