How Does the Real Estate Cycle Benefit Investors?
Investors in the real estate market have one goal – make money. Turning a profit on homes is easier than many people realize. The Real estate cycles is predictable and understanding how it works will benefit any investor. The biggest mistake that people make with real estate investments is trying to sell when they are ready instead of when the market is ready. If you really want to see your investment portfolio grow and be profitable then you need to understand the simple flow of the real estate cycle.
The real estate cycle continues to flow over and over again. Analysts have determined that there is a 12 to 15 year period that makes up each cycle. If you have been watching the market for the last 40 years then you are probably very familiar with several major Real estate cycles. In 1983 one of the more prominent cycles began. Many consumers can remember that the economy was in a bad place at that time with many people still out of work following the early 80s recession. By 1985 there was a surge in the economy which led to an economic boom. Whenever there is an economic boom people feel more comfortably spending money and the real estate market benefits and grows during this time. The DOW also rises and all together people are able to make money with their investments. In response to everyone making money, lenders will begin lending money again in a more liberal fashion. As we’ve seen in the last 10 years, this is typically where things begin to go wrong. All of this contributes to the real estate market running smoothly again. Home values are at an all-time high for that cycle and this is the best time to purchase a property. While banks take advantage of the profiting economy, they tend to over extend themselves and who they trust with money which ends in a serious economic recession.
Investors that understand this cycle will realize that the best time to buy a property is when home values are down and the best time to sell is when the economy is starting to profit again but before it flourishes so well that it leads to a collapse. This seems like a no-brainer for many people, but too many investors are eager to sell a property they bought for no money down before it costs them money and ultimately end up losing money.
