The Tug of War: Investors don’t play Tug of War – Pt 3

Part 1:  “the Tug of War:  Sellers in a Buyer’s Market”

Part 2:  “the Tug of War:  Buyers in a Buyer’s Market”

If you are a current seller with a home for sale or a buyer who is sitting on the sideline waiting for the market to change, I am going to ask you both to put down the rope for a breather.  I would like to request that you take a few notes on how real estate investors operate in a buyer’s market.

In this post, I am sketching the picture of a professional (or sophisticated) investor–not the novice who got excited one night watching “Flip that House” and got lucky in the previous seller’s market.  Professional investors eat and breathe investing.  It is their full time job. 

Investors operate differently from the average buyer and seller in a buyer’s market.  Typical to change in the market is confusion and paralysis among average real estate consumers.  Sellers sit on their price while buyers cross their arms and tip their nose – and the waiting begins.  Investors, on the other hand, take a down market as the cue to enter in.

Marching to a different beat.

Millionaire investors will tell you money can be made in real estate no matter what market you are in.  Why?  The strategy must match the market.  In real estate, your money is made when you buy.  So how do investors ensure that they are buying right?

Education is always first.

There is no point of arrival when it comes to education.  School is always in when it comes to investing.  The passive investor, not current on changes in market trends, mortgage rates, tax laws, real estate contracts and real estate law, will find themselves naked and exposed when the tide goes out.  Warren Buffet is the author of this shocking metaphor which illustrates investors who were unwise and became financially exposed to shifts in the market. 

Professional investors are aware that real estate markets can shift every 3 weeks.  Also, tax laws and real estate laws can change every year.  And mortgage rates can change every day.  Now before you throw up your hands and declare “I don’t have time for all of that”, let’s look at how real estate investors stay current on these various topics.

Real Estate is a team sport.

Successful real estate investors have all discovered the leverage of real estate professionals.  If someone kept up with all the previous mentioned areas of real estate, they would not have time to do any real estate deals.  Investors develop network relationships with professionals who specialize in each of these areas of real estate.  It is the job of these professionals to know how to keep these investors out of the red and in the black.  There are many investment courses out there that try to replace the education you will automatically get when you begin to work with competent real estate professionals. 

Now that doesn’t mean real estate investors only rely on professional advise.  They do do their due diligence as well and often follow self study programs.  The Bottom line though is this:  Investors realize the first investment they will make is education.  This investment always brings the greatest ROI (return on investment).

Knowing the Market is a full time job.

As previously stated, real estate markets can shift every 3 weeks.  I remember when the market shifted in Wilmington.  At that time, I was working more with buyers than sellers.  As I communicated the changes that were currently taking place to my clients, I continually found listing agents aloof to what was happening.  Many began to acknowledge the market changes a month or two later. 

The market change I am referring to is the last quarter of 2006.  In September, the number of solds were slightly down.  October, November and December the trend continued.  The result of the slipping sales meant an increase in inventory and thus a move towards a buyer’s market.  Many sellers weren’t aware that the market was shifting right under the for sale sign in their yard.  Star News eventually informed them if their agents did not.  Investors don’t take shifts in the market for granted.  It is easy to not react to something that is not a surprise.  Appropriate responses will be the natural result of being in the know.

The right attitude + the right strategy will = success.

The right strategy is getting your head out of the ostrich whole and face the reality of the market.  Formulate a plan, with insight from your network of professionals, that addresses the challenges of the market you are in.  Second, the right attitude is getting your heart out of the ostrich whole and knowing that the sun rises every morning even if it is hidden behind cloudy days.  Roll up your sleeves and take on the challenge of the market.  Make the commitment to get educated and don’t back down until you win!

Would you consider yourself an investor?  Take a minute and post a comment to this post and share your insight on the Wilmington NC real estate market.  Thanks in advance!