We’ve all heard or been told to live by the mantra of never looking back, that the past is leave it behind you and continue to move forward. I’ll admit, I don’t disagree with this approach for life or real estate investing. However, there comes a time when you can learn from the past and find value in previous mistakes.
Throughout your career you’re going to face challenges. Specifically, in the context of today’s topic. There will come a time you’re going to find yourself within different market conditions some being better than others. Admittedly you will find yourself hitting some challenging markets. Remember real estate is a cyclical industry, there will always be ups and downs.
If you stick around long enough in the real estate investing world, you’re going to experience these market swings and the in-betweens. What’s important though is that as you navigate the ups and survive the downs, at some point you need to take the time to look back and reflect on some of the challenges you faced. Then learn from those challenges. You know I speak from my own experience here in Dallas, Texas as a real estate investor. Right now, we are in an incredibly competitive real estate investing market.
There’s a tremendous influx of people moving into our market. Why? Jobs are good and the economy is great, we have a good climate, educational opportunities and a variety of other reasons why we are seeing this population boom. What this is creating is an obvious increase in home prices as our supply of homes has tightened and the demand for homes has increased. Fundamental characteristics of economies and increasing demand results in a decreasing supply and ultimately drives up prices. With all of these challenges, the competition among real estate investors who investing in single-family homes has become incredibly competitive. This market is frustrating many real estate investors not just in Dallas but around the United States. The time is right for you to get prepared for such market trends.
Be Prepared for the Future
If you find yourself in a highly competitive market, where investors are clawing for every opportunity, how do you prepare for that? Well, first and foremost from my experience, what I learned to do is to look back, exactly what I mentioned previously. What this means is looking back at your past leads. The ones you didn’t buy maybe six months ago, a year ago or even three years ago. does that mean. I find myself going back to these older leads, where maybe I didn’t offer enough to meet the seller’s objectives. Of course, there are always many reasons why a seller didn’t accept an offer. I encourage you, if you’re not big on follow ups, now is the time to do it! You’ll be surprised with this changing, competitive market that’s driving you crazy. This same market that are posing these challenges may allow you to purchase many of those homes you didn’t purchase in the past. Chances are your offer wasn’t accepted by the sellers in the past and neither were the offers of your competitors at that time, but the market has changed now.
I purchased a home from a lead I originally visited two years ago. My offer was insufficient and I didn’t get to purchase the house. Recently I went back to that same house, still owned by the same individual and I was able to make a new offer based on new market conditions. The offer was accepted. It met their needs and met their expectations. The same house, the same lead just a different market. The changed market had driven up prices and rents to the point where I was able to offer more for the same property and ultimately purchase said property.
Looking Back as a Buy and Hold Investor
When it comes to looking back, buy and hold investors have a tremendous opportunity as well. What I mean is, you need to take a look back at the properties in your portfolio. Are those properties now underperforming? Prices are so high and homes are so limited that same market for you buy and hold investor. Capri could be creating tremendous opportunities for your rental properties.
Maybe there was a house you didn’t buy right or maybe there’s a rent you didn’t set correctly and it’s an underperforming rental. You now know better so you should do better. Due to the increase in market prices, rents are being pushed higher and higher creating the perfect opportunity for you to capitalize on rental increases at the next lease renewal period. Raise rent accordingly to better reflect the market and turn those underperforming rentals into high performing rentals.
We’ve been implementing rent increases to reflect the market and our portfolio is performing so much better today than it did just a year ago. As we have tenants vacating properties and we’re remarketing properties for new tenants, those rental increases are even more significant than those we’re imposing on existing residents. At the end of the day, even in a frustrating market, you can find a friend in enabling those underperforming rentals into high performing rentals.
Review Your Portfolio
If you’re faced with a challenging market but have some investment properties in your portfolio, you need to review those assets. You may have an opportunity within those properties, to jumpstart your business. What I mean is, look back at the assets that might have been a bad asset or bad investment. Those bad assets have been creating equity this whole time. There may be some very attractive levels of equity within your portfolio. Equity that you could use as a result of the appreciating market, equity that you could turn into capital. That capital could then be used to purchase more houses, to increase your advertising or even refinance your existing asset mortgages.
We’ve refinanced several properties this year in 2017 based on this principle and it was worth it! We’ve been able to pull equity from several of our properties through refinancing and converted that equity into cash/capital. We’ve then turned around and reinvested that capital into our business advertising which helps us compete better in a highly competitive market. We also reinvesting in more properties which enables us to buy more properties confidently and quickly.
Ironically enough the market we thought was holding back our business has unlocked great opportunities for us. So, when you find yourself in a market that’s looking up you know don’t let it get you down. Opportunities always lie within those obstacles and challenges. Though you may live by the mantra of never looking back, right now may be a perfect time for you, as a real estate investor, to do exactly that.
Kevin Guz is an investor and podcaster. You can listen to all his podcasts here, http://www.blogtalkradio.com/kevinguz.