Targeting Peak Market Properties in Real Estate
The majority of our country is in a peak real estate market, that’s no secret. With projections scattered among experts as to how long the market can sustain such a cycle, no one can predict with certainty how long it will last. But, the fact of the matter is, targeting properties with the worst case scenario in mind will help secure your long-term financial investments.
Here are a few different strategies or suggestions to keep in mind when targeting any property in a peak market:
1. Target properties that hold consistent value
Residential properties in neighborhoods with little intrinsic value are often the first to take a ride down the roller-coaster when a market bursts. Why? There’s nothing to plainly differentiate them from the next home on the block, or two, three, five blocks away.
Lake properties, for example, tend to be the opposite. If you research 10 year histories on most lake properties, you will likely see a rather consistent market value over time. These properties do not take huge swings in the real estate market generally, even during critical low cycles such as 2008-2009. Plus, you can switch your strategy cycles later, even during a downturn.
2. Think outside the box
If lake properties, for example, hold value consistently over time, but there appears to be little inventory available, as is common during a peak market, gather a new perspective. Instead of purchasing a home, is there a plot of land available? Can that plot of land have a new pre-fab manufactured home added unto it, for example, creating potentially huge equity margins, especially in a peak market? Can you subdivide the lot into multiple parcels?
Imagine, for example, you find a build-able 1 acre lot for $30,000 in an area with $250k average comp values. Did you know you can have a 4 bedroom, 3 bathroom manufactured home built and delivered for about $65,000, sometimes even less? For $95,000 you may very easily have $100,000 or more in instant equity after furnishing and adding amenities.
HOA’s often times make lake property development a little tricky, but find a local realtor, broker, or contractor in the area to consult with who has first-hand knowledge and experience in that area.
3. Consider your option B, C and D strategies
So you’re considering the option above, for example, and think you have a good piece of property spotted, but you’re concerned about not being in the area for long and where you will live for temporary housing. You see option A, but nothing further. Real, legitimate concerns such as these often times drive consumers to look elsewhere.
So how do you handle this situation? Develop backup strategies and enhance your new perspective.
How about adding a cabin or guest house ($1,500-$10,000) onto one portion of the property to stay in temporarily as development is in progress, then rent it out as a daily, weekend, weekly or monthly rental to generate additional income when your house is ready? With the right location, you’ll be making money, and turning away interested visitors before you even realize how smart your idea was.
Why? Because you have option C and D still in your back pocket. When you need to move out for that new job or promotion you received, you hire the all-inclusive property management company (10% commission on average) to lease your home and handle booking, cleaning, and collecting payment from tenants, while continuing to rent out your additional cabin or guest house to earn even more additional income!
Or, in the event that tourism is down and lake property rental inventory is up, you plug in option D, sell. Maybe you still owe more than initially anticipated on a lien or mortgage, you sell the home and secure a lucrative return on your investment, no matter where the market currently rests at that time. Remember, you’re not in the suburbs where every other house is for sale, foreclosed, or vacant and looks the exact same. There’s little leverage there for others, while what differentiates your property is the location and multiple dwelling units.
Want to learn more about real estate investments and strategies?
Visit us at www.TheHomeFax.com or contact us at 248-629-6222 for your customized request and high quality real estate information to help you Know the Home Before You Buy™. In addition, don’t forget your home inspection during a peak market! You need all the leverage you can get from Home Fax™ Inspections in order to negotiate that purchase price!