When it comes to real estate, what’s most important? Is it possible to distill down to one word?
Personally, I can think of a few words that might fit the bill. We’ve all heard the phrase, “Location, location, location.” And understandably so—location is important. Cashflow also comes to mind. Without cashflow, real estate isn’t a very logical investment.
Yet there’s something we don’t often think of, that was presented to me at a Mastermind recently. “When.”
The Power of When
For real estate investors to get the most out of their properties, research is essential. Investors dive deep into the market to assess the viability of potential properties.
What are the politics, and how will that effect business? That includes laws that can effect landlords, pricing, and more. Then you have to assess the economy. Can people afford to live in this area, and are there jobs to support that? The diversity of jobs is just as important as the number—having a diverse tenant-base is key, because if all tenants have the same employer, what happens if that employer leaves or goes out of business? Investors must understand their demographics
And then there’s the property itself. There’s much work to be done to ensure that a given property is the perfect (and most viable) option. And even if everything mentioned above works out to be the perfect deal, timing is everything.
If you don’t have the right timing, even the best deal will be useless.
Understanding the Asset Cycles
Every asset has a cycle—starting from the bottom where the value of the asset is low, and ending where the value is high. The bottom of the cycle is great for buying-in, because prices are affordable. The top of the cycle is great for selling, because the return is high. Where you don’t want to be caught is when the cycle plummets. Some investments may be able to withstand the plummet, but it takes a strategic investor who can ride out the market.
Real Estate is no different. You could have the best property in the world, but if the timing is off, you could be putting yourself in a bad position.
I’ve experienced it myself, when I bought a property at what I thought was the bottom of the market. What I didn’t know was that the market still had another 20% drop in store. The property could have been more profitable had I waited for the market to even out again.
The same can be said for buying at the top of the market. It’s impossible to pinpoint where on the cycle the market is, exactly. You can only make informed estimates based on your research. And what may look like the middle of the cycle could actually be the top, causing a loss in profit.
Checks Off All the Boxes?
So, are you looking at a property that checks off all the boxes—a perfect location, with a booming economy, a diversity of jobs, and a promising cashflow.
If you have all of that information nailed down, make sure you have a very clear understanding of the market. While you can’t always be exact, you can make more informed decisions by doing your due diligence.
And what’s more, is that there are niches within the asset that could be at a different point in the cycle. It’s important to pay attention to the asset cycle of a given investment, be it commercial real estate, single family homes, multi-family homes, or Airbnb properties.
So before you invest, be confident in your timing.
You can listen to my new podcast, Cashflow Investing Secrets here.
Live your Freedom, Live Your Legacy, On Your Own Terms,
M.C. Laubscher is a husband, dad, podcaster & Cashflow Specialist. He helps business owners and investors create, recover, warehouse & multiply cashflow. You can learn more about exclusive cash flow strategies in M.C.’s new video series at https://www.yourownbankingsystem.com/
771: Mikkel Thorup: How To Secure Your New Life Abroad Through A Plan B
My guest in this episode is Mikkel Thorup. Mikkel is the world’s most sought-after expat consultant. He focuses on helping high-net-worth private clients to legally mitigate tax liabilities, obtain a second residency and citizenship, and assemble a portfolio of foreign investments including international real estate, timber plantations, agricultural land and other hard-money tangible assets.…
770: Mike Fallat: How To Multiply Your Business With The Million Dollar Book
My guest in this episode is Mike Fallat. Mike is the author of many business-related books. He has a goal of helping 1,000 entrepreneurs publish books and teaching them how to use their books as a gateway to generating 7-figures. His company, Dreamstarters Publishing, offers ghostwriting, cover design, automated funnels, and book fulfillment. They have…
769: Steven Bowles: Advanced Family Office Strategies
My guest in this episode is Steven Bowles. Steven founded Catalyst Advisory to take the experience he gained by working in a family office advisory firm and apply the best practices learned there to other families under an independent umbrella. Catalyst works with the best insurance professionals, wealth management firms, and trusted advisors to solve…
Leave a Comment