The real estate market can be a challenging thing to navigate. The housing crisis in 2010 left many investors feeling hesitant and stand-offish when it comes to purchasing properties at a rapid rate. However, we are able to now take a deeper look at what happened in 2010 and make smarter moves with the knowledge gained. Here are a few ways you can prepare yourself and your portfolio for a real estate market slowdown.
A great place to start is by analyzing the current market, and how it correlates to the markets of 2010. Often times, when home prices are on the rise you’ll hear the term “bubble” tossed around. A housing bubble suggests that a specific market has unrealistic and unsustainable home values that likely will not be able to sustain themselves. The housing crisis initially started because home loans were being handed out to nearly anyone who asked. Once the reality hit that these loans could not be repaid in millions of cases, the housing market was filled with foreclosures, shifting the balance to high supply with little demand.
The good news is that today’s market looks and operates in a very different manner than it had in the past, including in San Francisco’s market. The prices may be high, but loans being handed out without verification that they can be repaid are nowhere to be found. Another thing to consider is how inflation has also risen over the years, along with job wages.
Every investor’s worst nightmare is investing too early, and then the market crashing the way it did in 2010. Luckily, as we can see, it’s very unlikely for things to go this route again. If you decide to wait before investing, there is no knowing when that waiting will be over and puts a complete hold on your investing finances.
The best way to move forward? Many experts are advising investors to follow the BRRRR method: buy, rehabilitate, rent, refinance, repeat. Investing in this manner covers all your important bases. It allows investors to buy at current market cost, renovate the homes to improve their value, and then rent to tenants. By refinancing when the opportunity arises, you are assuring your property will be up to date with current market value. By repeating these effects whenever deemed necessary, you are essentially opening your doors to a successful cash-flowing investment property.