Real Estate Investing Explained: These are the 5 WORST things you could do if the real estate market drops in price…enjoy! Add me on Instagram/Snapchat: GPStephan
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I think we all know that, AT SOME POINT IN THE FUTURE - whenever that may be, the real estate market will inevitably drop in price. The fact remains prices won’t always continue going upward, all the time. Given that, it’s what you do in these times where the market DOESN’T increase in price that really matters the most.
The first, and BIGGEST mistake people can make if the market drops is to panic and make emotionally-driven decisions. This is, by FAR, the worst thing you could possibly do. The reality is that accurately timing the market is nearly impossible - even the BEST people won’t be able to predict when the markets will drop, how long they’ll drop, or when they’ll recover. I personally believe, and many studies have confirmed, that the best investment strategy out there is to simply buy on long term fundamentals, stick with it, and hold long term.
The second mistake people make is to over-leverage and go in too heavy on an investment they cannot afford, especially if it’s a volatile investment. I think it goes without saying: don’t over extend yourself if you cannot afford to weather the storm. Anytime you’re investing in real estate, MAKE SURE YOU CAN AFFORD IT. This means that the property doesn’t consume all of your income. It means you already have a safety fund in place in the event you need it. It means that you’re able to buy the property and still save/invest a portion of your income.
The third mistake people make is buying purely for the short term. Some may disagree with me on this, but I think there’s a big difference between investing and speculating - if you’re buying something with the intention of selling in a year because it’ll be worth more, I’d say that’s a little more akin to speculation. The longer you own real estate for, the more likely you are to come out ahead.
The fourth mistake people make is play it too safe. These are the people who have been saying “Real estate is a bubble” since 2013. These are the people who said the stock market is over valued since 2014. These are the people who typically just never invest because they’re constantly waiting for things to drop…oddly enough, those same people never invested at the bottom of the market because they were convinced it was going to drop further. And they’ll wait a lifetime for that opportunity, meanwhile their cash simply loses purchasing power to inflation every year.
The fifth mistake you can make is not to have enough cash on hand to take advantage of deals that come up. One of the biggest advantages I’ve had in my investing career is that I’ve always saved as much money as I could. I’d save, save save…and when I found a deal, I’d buy it. I’d then go right back to saving…and when another deal would come up, I’d buy it. I didn’t care about market timing, I didn’t care what prices would be a year from now…I simply saw a good deal, I knew I could add value, I knew it would make money, I knew I could comfortably afford it, and that was that. Having cash on hand has allowed me invest in properties that have, combined, made me over a million dollars in profit.
The moral of this entire video is really just to make sure: buy on fundamentals. Buy a deal that still makes money in a worst case scenario. Don’t over extend yourself, and make sure you keep some cash to cover anything unexpected. Don’t worry about short term real estate prices, buy on a long term outlook. And don’t bother trying to time the market…just wait until you find the right deal and go for it.
For business inquiries or one-on-one real estate investing/real estate agent consulting or coaching, you can reach me at GrahamStephanBusiness@gmail.com
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