When we talk about a possible recession your mind may immediately jump to the market crash in 2008 and whatever your experience was then. Mike Simmons from the 7 Figure Flipping team, came on the podcast to talk about his experience as a real estate investor during a ‘market crash.’ He had just started in real estate when the 2008 recession hit, and everyone told him there was no way it would work. He got in when everyone was saying get out. What he learned is times like these are an incredible opportunity to make big things happen in your life. The market can dictate how you structure and run your business, but it does not mean you will fail.
The Market:
There is no bad market, only bad strategy. The real estate market is generally defined as a ‘buyer’s’ market or a ‘seller’s’ market as the two opposing ends of the spectrum. When house prices are high, it's a seller’s market. When house prices are low, it’s a buyer’s market. However, the truth is, the market is most often transitioning between the two. Most people are comfortable knowing what to do in one of those two extremes, but not in the transition. Right now we are slowing down from a seller’s market and it looks like we are starting to go back the other way. It is going to become easier to buy and harder to sell. This is an educated projection that will help us prepare for an upcoming ‘transitional’ phase in the market. As a house-flipper it’s important to note a prediction that says in the next few years it will be harder to sell houses because accurately pricing your houses will make or break your profit margins.
Strategically Pricing Ahead of the Curve:
Pricing houses is about smartly predicting where the market will be when you need to sell, and setting your budget accordingly so you don’t lose money. When house prices start going down new investors enter the real estate game because it is easier to buy houses at lower prices. What does that mean for you?
New investors have a learning curve; they don’t always know how to price houses. This gives you an opportunity as an investor with more experience to take initiative and relieve newer investors of properties they may have mispriced when they don’t sell.
The market is all about how you look at it. You can look at an appreciating market as the most challenging time to be an investor. House prices are going up, it’s harder to buy cheap and flip. However, if you are in the depreciating market and aren’t sure how to take full advantage of it, it will feel equally as challenging. If you are new to the industry you don’t know what you don’t know, and you may not be able to take advantage of every opportunity that presents itself. If that is the case, aligning yourself with experts and a community that does know what you don’t know, can make all the difference.
Don’t Panic, Look at the Big Picture:
The market is always going up and down so you have to look at it in a macro way over a period of time. The media will try to scare you but it’s your job to ignore scare tactics and know that regardless of the market, you will still buy low and sell high but your sales conversations will change. In a buyer’s market, you have the advantage initially, but you face perhaps a bigger challenge selling. The bottom line is, people will always be buying and selling houses based on life events; marriage, death, children, divorce etc.
Life events stay the same, you just have to know where you are in the market so you can enter into the best conversation for the times, and price your properties accordingly.
Pro-tip to Prepare:
Build your relationships with buyers and sellers and be in a conversation about what they really need with the shifting economy. Maybe as the buying gets easier you will start being more discerning with the properties you buy. Maybe your conversations as the seller become more nuanced and your contracts become more personalized and strategic.
The Bottom Line:
The market can be good at all times, if you shift your approach to meet it. You have to know where the market is going and get there before everyone else. There is always a way to strategically win in every market.
We will however be the first to say, this is easier to do with a group of like-minded people. When you are in a conversation with experts and other entrepreneurial minds you have the conversations that put you ahead of the curve. That’s why we are here to offer you not only our predictions and strategies, but opportunities to be a part of communities dedicated to staying ahead of the market.
