More and more first-time investors are looking to get their feet wet in the real estate industry and add to their investment portfolio. But, how do they know if the time is right?
While investing in property can be a beneficial way to increase your holdings, following the ebbs and flows of the market can make a difference if you get a deal or overpay for a property. A market may be hot now, but by the time you get your buying strategy together, you could miss out on a golden opportunity.
To help you understand when to strike on a property, 10 members of Forbes Real Estate Council share whether there is such a thing as being too late to a market as a real estate investor and what signs to keep an eye out for.
1. Debt And Equity Capital Are Scarce
Very often, people refer to the idea that we are in the late innings of a real estate cycle, and to invest at such a time is unwise. While that may be the case on a macro basis, the best time to invest may be when nobody else is investing. Typically in the late innings, debt and equity capital are scarce, which allows for more opportunities on a micro basis for those flush with capital. – Mark Fogel, ACRES Capital
2. Property Generates Negative Cash Flow
If you’re buying property hoping that it appreciates, that’s speculation rather than investing. If a property does not provide positive cash flow with a 20% to 25% down payment, then you are speculating rather than investing. In an up market cycle, purchase prices rise faster than rent incomes. Negative cash flow with a small down payment indicates that you’ve arrived to the party too late. – Keith Weinhold, Get Rich Education
3. Rents Are Declining
Look at the development pipeline, compared to existing stock. What percentage is new development? If rents are declining and concessions are common, the market is past its prime for a short-term investor. Their investment parameters are heavily weighed on rent growth, capital expenditure needed for a value-add and number of units. While a market may be past its prime for a short-term investor, it may…