We are wrapping up the first quarter of 2017, and I continue to prepare for the remainder of the year here in Dallas, Texas. Yet after talking to other real estate investors, in various markets, I have recognized a unique theme: the residential real estate environment, right now, is an incredibly competitive market. We as investors, be it part-time or full-time, are feeling it. My point is, it may be a struggle right now but don’t let it get you down. You have to get up and stand up to succeed as a real estate investor.
When you enter a market like this it can be very discouraging. My message is, don’t get discouraged. For those of you who are beginning or new to real estate investing, let’s take a quick look at what the landscape looks like in residential real estate investing, nationwide. There are a couple very common themes that vary across markets. Chances are these themes are apparent in your market too.
Inventory
Right now, inventory for residential real estate is low across the country whether you are buying as an investor or as an owner/occupant. The demand for properties, in most markets, is incredibly robust currently, which in return is depleting the market. Even the realtors who are not engaged in investing, will tell you that days on market are at an all-time low. Great for real estate agents who are selling, but are challenged when they’re representing buyers due to low inventory. As a real estate investor, you must be competitive and proactive.
When inventory is low and demand is high, prices go up. Forcing investors to look at how they are investing in houses. They look at how they finance deals, exit strategies and what they pay for their houses. Low inventory may even dictate what you do with those houses once purchased, your exit strategy might change. You, as an investor, should be willing to adjust your strategy in order to navigate through these higher priced markets.
Real Estate Investing Popularity
In addition to this hyper-competitive market, the markets are saturated with investors. This idea might be contrary to what you are thinking. You might have the thought, “Well, if it is so tough out there, how come there’s so many investors?” Well, residential investing has become incredibly popular here in the U.S., for a lot of different reasons.
One of those reasons is because of all the television shows you see about flipping houses, and investing in real estate. People have found real estate as an attractive investment other than the stock market. It has become so popular so quickly that real estate investing is becoming a formalized or commercialized investment asset class. Which is exciting, I must say.
Sellers Have Options
A challenge for investors in this hyper-competitive market in particular is sellers of residential real estate now have options. Sellers can choose alternative ways for selling a property such as: listing and selling with a realtor on the MLS or selling to a real estate investor.
Homes in this market will sell quickly and at a premium price. Sellers can pretty much dictate the terms of their sale. Investors used to be a specific and unique alternative. Now we’re simply an option for sellers. We are competing with the MLS and we’re competing with realtors to purchase homes making it much more difficult. However, despite this doom and gloom, I will reassure you that opportunities for real estate investors still exist and are strong. There’s an abundance of deals available for real estate investors. I pose these questions: will you begin to exist, exist or continue to exist as a prospective, new or tenured real estate investor?
Stresses Always Exist
Let’s face it. The stress always exists as it relates to real estate investing. The stress being first off, the existence of a distressed home. Maybe the homeowner has fallen behind in their mortgage and facing the risk of foreclosure. It could be that the homeowner has hit a complexity in their life and their house has fallen into disrepair as a result. Stress also comes in the form job loss, death in the family or divorce. Even in this hypercompetitive market these stresses still exist. There will always be a need, and more importantly, an opportunity for investors to serve a purpose for these distressed sellers by purchasing a home for cash, as is and quickly. Don’t convince yourself that these opportunities don’t exist or exist any less than they did yesterday. They are out there, you just have to find them and capitalize on them.
The point is investors, we satisfy a unique market niche. We satisfy a true consumer need and we provide a unique service as well as a unique ability to purchase properties sometimes sight unseen, for cash, as is and we can close quickly. This is the need of those distressed sellers, something realtors and the MLS cannot accomplish.
There IS an Abundance of Deals Out There
There is an abundance of deals out there today. They exist and they exist in every market. We as real estate investors are not the first industry to face competition. In any industry, where there is great opportunity for success, there is great competition. We are not unlike any of those industries. We are not concerned that there is competition in our industry but should be concerned if there wasn’t any. This would indicate our industry isn’t strong enough. It’s important to remind yourself that deals for residential real estate investors are created, not deserved. You as an investor have got to go out and find these deals. Create these deals and successfully execute them.
Again, the question is, will you continue to exist or begin to exist as a real estate investor? Can you compete? Can you answer the question can you deliver a solution that is going to exceed the consumer expectations those distressed sellers? You must look at your abilities and evaluate whether you can be a solution provider for these distressed sellers where the abundance of deals are available. Let’s face it, someone in your market is getting these deals and why can’t it be you? It’s happening every day. I’ll be the first to tell you they’ve got the marketing, the skills, the network and the professionalism to make these deals happen. You, as an investor, need to have those same characteristics. You need to be investing in you and your business. Investing in a mentorship, investing in marketing, investing in training and seeking out unique partnerships, perhaps with other investors, so you can match your competition.
As real estate continues to emerge as a commercialized asset class, we investors must emerge as sophisticated professionals, able to navigate all the challenges of this commercialization and all the challenges of this competitive marketplace. You know when you think about it, the same reasons we were attracted to residential real estate investing are the exact same reasons other have and this is why it is a hypercompetitive market. It is an attractive investment class for so many people. We as investors have to make sure we have enabled our success by growing, maturing and innovating our business as well as ourselves. Just like how our industry growing, maturing, developing and innovating. That is what we must do to be successful.
Kevin Guz is an investor and podcaster. You can listen to all his prerecorded podcasts here, http://www.blogtalkradio.com/kevinguz.
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