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Understanding The Real Estate Cycle To Score A Deal In Any...

With most things in the life, the best advice someone can give is to take a step back and look at the bigger picture. But when you’re evaluating real estate markets for investment, I’ve found that you have to get into the nitty-gritty details. The Basics There are four phases in the cycle of real estate, and they look like this: Phase 1: Recovery Recovery is typically the most difficult phase to identify. When a real estate market is recovering from a recession, demand can still be slow. Phase 2: Expansion Markets in expansion are transitioning up and are faced with growing demand. The economy and job growth in these markets will look strong; rents are on the rise and vacancy is low. This is also a prime time to deploy value-add tactics. Even though no one can predict when the next expansion phase will come about, these fixed-term assets ensure a level of high performance until the next lease roll, providing stability when a recession hits. Phase 4: Recession When the players in a market either don’t recognize the downturn or choose to disregard the warning signs of waning demand, the hyper supply phase falls into the recession phase. So a strategy that works in the hyper supply phase in San Francisco will be less effective in an expansion phase in Dallas.