There is a lot of information out there regarding the real estate market, what it’s doing, and what people think will happen in the future.
Some of this information is helpful and some is not. So how do you know what information to listen to?
Here are five keys that we at Klinkloans think are important when analyzing information about the real estate market:
1) Don’t get swayed by sensational headlines
- Bad news sells or clickbait is becoming pervasive. So you can’t always believe the headline or everything that you read. What are the facts and data supporting what I’m reading? What are the sources?
- Media is in the business of getting attention. The media loves to sensationalize because it gets attention. Fear grabs people’s attention, so it can be easy to feed on.
- This does NOT mean all info is spun negatively, it just means take everything your read with a grain of salt. We must separate facts from emotion.
2) There is no such thing as a national real estate market.
- Markets are driven by supply and demand.
- When there is a high demand for housing, prices will rise. Whereas when there is a large supply yet little demand, prices will fall.
- Supply and demand constantly fluctuates and varies for each local market. Low demand in Albuquerque, NM doesn’t mean that same thing is happening in Phoenix, AZ. Each market is very different from other regions, states, cities, and even neighborhoods.
- To summarize: if you see some national real estate news or “trends” just know that it may not apply specifically to your area. You need to know the local market that you are investing in.
3) Find good data and analysis for your local markets. Follow the experts!
We can all have opinions on where the market is going. However, it’s important to have solid data that is analyzing what the market is actually doing, and the direction it is headed in.
It is impossible to predict what is going to happen 2 years from now, even a year from now. However, with the right data, you can see what’s happening for the next couple of months in front of you. Tina Tamboer of the Cromford report said their data “acts like the headlights of a car that is showing you where you are going, and when there is a turn in the road”. You may not be able to see very far in front of you, but at least you can see far enough to identify if there is a turn.
Our favorite source for understanding the real estate market in Arizona is the Cromford Report.
They have some info available free to the public, but if you want more details, I collect data from experts and send it out to my own database. If you want to receive future market information I send out, you can sign up to receive it here.
4) Adapt accordingly
- It is important for any business to be able to adapt and change in order to stay competitive. Investing in real estate is no different.
- Is data showing a strong seller’s market? Then you can probably continue to flip with high confidence. Is the market now trending towards a buyer’s market, with a higher supply and less demand? Flipping is still possible, but you will now just have to ensure that your buy is a really good deal so your flip can be profitable. Even if values aren’t rising, buyers markets can be a great time to purchase real estate with low prices. You just need to make sure you are calculating and planning correctly for lower rents, lower sales prices, etc. that also comes with this type of market. Our Fund manager: Mr. Jean Klinkhamer bought and sold some of the most profitable flips in the downturn years of 2009-2011.
- Money can be made in almost every market, but it requires analyzation and adaptation.
5) Be a Contrarian Investor
Don’t run with the crowd. If you run against the crowd, this is often where opportunities can be found. So even if everyone else is talking doom and gloom, try to find how you can turn this situation into an advantage!
Warren Buffett points out the simple recipe for being a contrarian investor,
“Two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics will be unpredictable. … We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
What have you found helpful when analyzing the market?
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Call, text, or email me if you want to learn more about real estate investment, or private money (hard money) loans. I would love to assist you.
Types of transactions that we lend on:
Fix and Flips | New Construction | Vacation Rentals | Group Homes | Multi-Family | Bridge Loans | And more!
Mike Zins and Jean Klinkhamer
Klinkloans Fund is a part of the Private Lending Division of Stewardship Mortgage. Klinkloans Fund is a private money lender that provides trustworthy and reliable real estate financing and service to help real estate investors achieve their goals.