Guidelines for Real Estate Investors Seeking To Survive the Crash Housing Market
Everyone, particularly investors, undoubtedly experience a great deal fright and concern when the market crashes. The market looks great with a graphical rise, but as it begins to slip, all concerned parties will find the event rather stressful. Veteran investors often become a sort of guide for new investors as they seek strategies to survive the changes in the housing market from year to year.
The reality, however, is that most investors are unlikely to leave the whole experience unscathed. At the first sight of any sort of stumbling block or slip in the market, many will run scared and rush to bail before they sink. What these novice investors fail to realize is that the secret to success in this business is to stick with it whether the times are good or bad.
So, how does one deal with changes in the housing market? How do you survive the pitfalls so you can reap the benefits once the market resumes its former glory (or at least some of it)?
Firstly, it is important to avoid selling while the market is on a downward trend. If a property you purchased suddenly undergoes depreciation, the best approach would be to retain that property at least until the market climbs again and your property value is restored. Indeed, this can be quite stressful and frightening even for experienced investors. Nevertheless, should you examine the market's cyclical nature, you will be pleased to discover that it will always bounce back. Though the time for this rebound may vary significantly, the important point to note is that it will in fact occur.
The mistake many investors make is to become bogged down by fears that the market will actually worsen, and this causes them to rush into selling while the housing market is down. Certainly, that risk does exist but remember that once it hits the bottom the only place left for it to go is back up to the top.
During this specific market phase, selling can be quite an emotional decision which is often not very well thought out. In some cases, investors who chose to sell during these troubled times, find themselves having to scramble to round up the necessary funds to cover the costs of closing the deal. Take a moment to consider the breakdown of a decision such as this.
Sure, the downturn in the market has you concerned that things will only get worse before they get better. This causes you to sell your property for a price far below the price you initially paid and possibly even less than what it has been mortgaged for. The buyer will simply wait until the market comes around, as we all know it will, at which point they will be able to make an incredible profit by taking advantage of this great deal.
An alternative to selling is to retain the property and put it up for rent. History has shown that the number of renters increases drastically as opposed to buyers during down market seasons. This is simply because first-time buyers get pushed out of the housing market because lenders now become more conservative and put more restrictions on the loans they do issue because of more stringent underwriting guidelines. Despite this, however, everyone ultimately still needs somewhere to live so many of these persons will simply rent a home while they wait for the market to climb. If you do decide to sell during these troubled times, be sure that you have thought about it thoroughly and that you are not just making a knee-jerk reaction to the emotional stress.
Besides waiting for the market to rebound, it would also be prudent to set aside some cash if at all possible. True, this may prove difficult when you find yourself already in the midst of a crisis. It is, therefore, recommended that whenever the market does bounce back you should make an effort to set aside whatever money you can to help bolster yourself should the market take another downfall. This extra cash can provide a much needed cushion while you await the restabilization of the market and it also allows for the availability of a wider array of options in these circumstances.