As the real estate market starts to feel the impact of COVID-19, many real estate investors are curious about when is the right time to get in the market. If only there was a crystal ball to show the way, and say this is the time to jump in. In my humble opinion, we should heed the sage of Wall Street’s advice, ““Be fearful when others are greedy and greedy when others are fearful” ― Warren Buffett.
Baron Rothschild, a member of the Rothschild banking family, is known for saying "the time to buy is when there's blood in the streets." These two pieces of advice have guided investors through turbulent times in the past, so as real estate investors consider getting into the market, we are surveying the market for opportunities. Here is what we think you can do to be greedy when others are fearful.
Trying to time a market bottom is a fools game. The famous investor Peter Lynch quipped, "Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves." Having a longer time horizon for your real estate investments gives you the opportunity to take advantage of market corrections. Adding properties to your portfolio while the market goes down and buying in different neighborhoods or cities, will provide diversification and ensures you are not buying at the top of the market.
Taking the advice of a lot of investors by dollar-cost averaging. This is a strategy to help reduce risk and the impact of market volatility by spreading out your real estate investments over time, so you're not buying all our property at the peak of the real estate market. Some of the benefits of dollar cost averaging are: markets rise over time, avoid mistiming the market, take the emotion out of investing, helps real estate investors think longer-term, and can prevent unfortunate market timing. Bottom line, the advice of Peter Lynch can help us all navigate through this horrific time: "I can't recall ever once having seen the name of a market timer on Forbes' annual list of the richest people in the world. If it were truly possible to predict corrections, you'd think somebody would have made billions by doing it."
With a barrage of news coming in like a rushing river, it is important to see the market as it really is, which very few can do because of the uncertainty and newness of COVID-19. Keeping perspective and watching the flow of capital from government programs and Wall Street can show clues of when might be a good time to get into the market. Looking back on the financial crash of 2008 and 2009, those investors that had the stomach to deal with the volatility saw huge gains, but those investors had to wait several years to see those gains.
Today or tomorrow might not be the best time to jump in the market, but now is the time to start searching for opportunities. Our hearts go out to the folks dealing with financial hardship and health issues and do not want to discount that, but this article is about taking advantage of market volatility, not people down on their luck. Keep perspective and get ready for a buying opportunity, because we will get through this.
In summary, I’ll finish with a quote by Benjamin Franklin, “An investment in knowledge pays the best interest." If you are new to real estate investing or ready to buy your next investment property, then now is the time to start investing in yourself by learning as much as you can about the world of rental property. There are thousands of books out there and real estate brokers that can share a wealth of knowledge on the topic. Now is the time to network with real estate professionals and jump on webinars or conference calls with other real estate investors. Now is the time to innovate and educate oneself.
“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” - Franklin D. Roosevelt. We think FDR was onto something.