Buying an investment property is a big commitment, and your goal is to get the best value at the best price. While the real estate market wants you to believe that location is the only important factor in your decision, smart buyers know there's more that goes into success. Timing is key to profitable real estate investment, and that doesn’t just refer to the general year-over-year health of the market. You can purchase a higher-quality property in a better location if you time your offer for real estate’s slowest periods.
The Best Time of Year to Purchase Investment Property
Real estate is cyclical, and you often hear about buyer’s markets and seller’s markets. Buyer’s markets are the best time to purchase real estate, specifically because no one else wants to buy. There are lots of homes on the market, and sellers must compete by lowering prices or offering incentives. Conversely, seller’s markets are the best time to list a property, because there are too many buyers for the number of homes available. Under these circumstances, motivated buyers typically have to pay the asking price, and in some cases, bidding wars ensue.
In addition to the long-term real estate cycle, there is a seasonal pattern to buyer’s and seller’s markets. Many agents target their listings for spring and summer, because the warmer weather makes house hunting far more enjoyable. Moving during the winter months is a hassle, and buyers are few and far between.
Investors can find a great deal on property during the winter months, especially during the holidays, because there's virtually no competition. Those listing their properties despite the hustle and bustle of the holiday season typically have a pressing reason to sell, and this motivation can translate into a lower price for you. In addition, sellers will be far more willing to entertain any stipulations you include with your offer, and they're more likely to agree to pay the expenses of necessary repairs identified through the inspection process. You may have fewer options to choose from, but you're likely to find a good match at a great price.
As an added benefit, when you buy during the winter months, the process is likely to move along quickly. You won’t be competing for attention from mortgage brokers, real estate agents and the other service providers involved in real estate transactions, which cuts down on waiting time for all of the tasks that need doing before you can close.
The Downside of Buying Investment Property in the Winter
Of course, buying an investment property during the winter months is not without challenges. The most critical is the possibility that snow is covering major structural or aesthetic issues that you would be better able to see in the spring. Be sure your inspector pays special attention to outdoor features like swimming pools, and protect yourself against problems with the roof and air conditioning. You should also be prepared for potential landscaping nightmares once the snow melts.
On the positive side, seeing the property under the most stressful weather conditions gives you a better understanding of what you might face as the building’s owner. Examining the performance of windows, pipes, insulation, and similar items under the worst conditions is far more realistic than seeing these same components during the summer months.
Despite the difficulties involved in purchasing property during the winter, the payoff can be well worth the trouble. Any repairs or remodeling can be completed before things thaw out, so when potential tenants are ready to move, you'll be ready, too.
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