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20 Year Look-back
Where we are in the real estate market cycle determines where the opportunities and risks are.
A 20-year lookback - as an example:
2003-2007 - High Prices, Anyone Gets a Mortgage Era - Opportunities were in fixing and flipping quick turn-off market deals. Buying rentals was extremely risky. The average 3 unit in Boston went from being worth 600k to 200k in just a few years. Many who bought rentals during this time period lost them to foreclosure or short sale in the next era.
2008-2013 - Market Crash, Foreclosure, and Short Sale Era - Opportunities were in buying short sales and foreclosures on the MLS and at auction. One of the few time periods where you didn't need off-market deals and could buy virtually any kind of asset and come out on top. I can remember going to auctions and buying 3 unit properties in the 100-150k range.
2013-2019 - Off Market, Low Inventory Era - Much harder to go on the MLS and get a great deal. Both buy and hold and flips typically need to be off-market to work well(unless you get lucky). Because most people are not doing direct-to-seller marketing, those who learn how to do direct-to-seller marketing do well. If you were doing direct-to-seller marketing during this time period, you were able to get deals for just as good of prices as the foreclosure era.
2020-2023 - Everyone Is An Investor, - a oversaturation era. Now that most investors know that they need to buy off-market, even direct-to-seller marketing becomes challenging. This is the hardest part of the market cycle to make money in as an investor. Small buy-and-hold properties become harder, if not impossible to cash flow. Flipping becomes much more challenging because of the extreme competition to get deals. Only the best operators during this time period did well. My fear is that some of the small multi-unit buildings purchased during this time period end up the same way that they did in 2008-2013 era.
As you can see above, there is a shift every few years - and you are either adapting to that shift, or you get left behind.
The average investor is doing things that worked 2-3 years ago - and not what is working today. Most are copying what they have seen other investors do in the past and not what they are actually doing today.
I remember back in 2009 when I had over 50 short sale listings - and other agents and investors didn't even know how to process a short sale. In 2009, most agents and investors were still operating like it was 2006.
We made great money from short sales mainly because we were ahead of the curve. Being one of the few to do something limits your competition.
By 2013, while most agents and investors were focused on short sales, we were on to direct-to-seller marketing.
Having the wrong plan the last time the market was high(2003-2007), let to the foreclosure crisis - and because of that it is imperative that you have the right plan.
Taken from Agent Investor, Tom Caferella
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