Real estate market free fall and uncertainties pose a great threat to real estate investment, this account for low cashflow, high rate of vacancy, inability to pay up mortgage on property, it causes reduction in value of real estate property investment and other whammy or set back events.
Many real estate investors find it difficult recording much success in real estate investing due to not adequately managing and protecting their investment against economic downturns, market free fall and uncertainties or introduction of new government policies that cause reduction in price and value of real estate properties which consequently have adverse effect on the estimated cashflow analysis.
Hence, this is the reason why real estate professionals take time to study changes in demography, conduct market research and analyze the market to stay abreast of the real estate market trend in order to swiftly switch from one real estate investing strategy to another if their initial plan does not fit into current market realities.
But many real estate investors are yokel, old fashioned and don’t understand what it takes to succeed in modern day real estate investing.
We can’t over emphasize the importance of having good real estate investing and exit strategy prior to real estate investing adventures but many investors ignore this are blinded to realize the danger of not having exit strategies portend.
It is of utmost important that real estate investors protect their investment against market free fall and uncertainties to enable profit making at every stage of the investment life cycle even if they have to sell below the market price. There are many real estate investing and exit strategies investors can adopt or develop and most importantly stick to or follow judiciously in order to successfully build financial stability and wealth.
However, if you are wishy washy about real estate investing and exit ideas, you need to seek advice from experience investors or real estate professionals who would be glad to work with you and guide you through all the needful to succeed in real estate investing. In the mean time here are some strategies you can adopt to protect your real estate investment against market free fall or uncertainties.
As an investor you can protect your investment by leasing out your real estate property with an option to purchase by the potential buyer at a price within a specific period. This exit strategy is known as Lease Option Purchase arrangement and it gives investors more control over their properties.
Another very good strategy is the Fix and Flip which allows investors to create and make instant profit in real estate investing by taking extra steps to get great deals. The benefits or features of a fix and flip property explains why many investors adopt and use this strategy. Investors unlock this instant profit by simply searching for great deals, buy at discounted value and also force appreciation of the property value by improving the condition of the property in order to sell at a high price to increase income and consequently enable them to make instant profit from the sales transactions of the property.
The most used investing strategy by real estate investors is to purchase a real estate property below the market price through all cash or mortgage financing and hold for rentals for a period of 20 to 30 years depending on the mortgage loan terms. This strategy is often refers to as Purchase and Hold and it requires an investor to pay mortgage yearly which the rent should definitely take care of if due diligence is performed and the investor is right about the cashflow analysis estimates and also reasonably factored in all expenses regarding maintenance, mortgage, management fees, issurance, taxes, vacancy rate, cost of marketing and advertising of the property.
An amazingly fast and reliable exit strategy is to auction the real estate property when the need arise. This helps to cut down on losses incurred monthly on carrying cost on the property and to do this effectively all you need to do as an investor is to get wind of the estimated value of your property, negotiate with a reputable auctioneer on all costs and fees associated with auctioning your property. This exit strategy is swiftly, reliable and also allow investors to make some profit even if you are selling below the market price.
Real estate investing can sometimes be a fair weather friend but investors must be wily and smart enough to weather the storm. Developing or adopting a realistic real estate investing and exit strategies is the surest way of gaining financial stability in real estate investing as I have rightly mentioned earlier.
However, a smooth and successful exit in real estate investing hugely depends on the ability of the purchased property to regularly and consistently produce sustainable cashflow, equity and also must reduce the vacancy rate by allowing rent below median price in times of market free fall.
In addition, the accuracy of cashflow analysis estimates has a great role to play when real estate market turns and ignoring part will be a dreadful mistake and could be your direct flight to investing destination failure.
Cashflow misjudgement is ludicrous and could turn your assets into liability within a very short time most especially during period of real estate market uncertainties or recession. Investors must be realistic with their cashflow analysis by ensuring it produces monthly positive cashflow that will enable settlement of debts, pay for all expenses, provides opportunity for reinvesting profit and also serve as buffer for investors against financial challenges.
Moreover, real estate investors must cultivate the habit of paying down on existing mortgage loan. Although many real estate journals, books and experts encourage and advice that reinvesting of profit and income into a new real estate property is the best way to quickly build wealth in real estate. This may work smoothly in very stable economy like the United State, United Kingdom and other developed nations where the economy experience a relatively stable with favourable government policies and the real estate market also does not experience any form of volatility.
However, reinvesting profit and income into new real estate property when you have mortgage debt to pay could be disastrous if there exist a sudden and unforeseen free fall of market price that leads to reduction of cashflow and income which as a result makes it difficult for investors to pay their monthly mortgage. I am of the opinion that it is wise and reasonable to pay down on rental property mortgage and interest while you can in order to give you some leverages in times of economic downturns.
Furthermore, real estate investors can also use wholesaling of property as an exit strategy by engaging real estate agents that work with investors on a regular basis, who can easily locate and find reasonable number of potential buyers for their properties at a fair price within the shortest possible time.
Only few real estate investors understand the essence of building and maintaining good relationship with other real estate investors, professionals and contractors who could assist in enhancing and improving the quality of service rendered to the occupants regarding swift response to maintenance problems, attending to and resolving occupants grievance and concerns timely and also charging affordable rent.
All of these good and full rental services offered by the investor can help reduce vacancy rate in times of real estate market free fall or uncertainties owning to the fact that people love to stay where they can get value for their money, if you are excellent in your service delivery and also known for providing quality rental services then this could serve as a buffer against market uncertainties.
On a final note, if you as an investor adhere to these tested and trusted practical real estate investing and exit strategies and can take advantage of this reliable buffer against real estate investment market free fall, uncertainties or economic recession by making conscious effort to utilize these exit strategies whenever the need arise, you will uncovere how easy it is to breeze through a guaranteed risk and loss free liquidation of your properties whenever you need to exit from any real estate investment.
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