The $750 Novice Lesson We Have Learnt Before Landing Our First Investment Property

Many lessons we learned from our career and experience. We also learned some investing lessons in our real estate investing career. Let’s start the lesson with the point why we selected a particular market.

Selection of a particular market

Prior to anything else, the important step was to catch our real estate investment agent. The real estate agent is always a very vital part of the team we are creating. The second step is to inform the agent that we have the funding and we are ready to start now. Our agent was super excited to help and pursue, Although the target market we have set was an hour away from us. We selected this specific market for some reasons that are:

1. The target location is still close to check on the properties and stop by randomly.
2. We are currently living in a high buy-in rate. And the new market is at a low rate.
3. In our target market, there is a hospital, university and military base.
4. The Rate on Investment is also higher.

Unseen Location

Many investors do no physically see the location and the properties. They usually go with the pictures and disclosures. We almost disagree with this particular style of investment. The main reason is I have seen many properties which I do not like first but I purchased them at a risk if it seems a bit right deal. And trust me you should go by yourself to see the location. Unseen locations can destroy your property deals. That was the reason we all went to the location. We have not found anything suitable or attractive. First few trips were a total fiasco. Our team was willing to do minor repair and renovation but we were looking for a good place.

First Property

We strolled for some days and after a few trips, we have found a good property. We have seen it before but we left that because that was out of our target. But still, we find it convenient as compared to others. The location was very good and suitable as per our demand and likes. And also, the owner negotiated in the price with us very well.  He lowered down the price enough. That seemed a good deal we cracked.

After the 2 weeks of the contract, we wanted to go for an inspection of the property. The inspector was also included in our team. And he was ready to go for an inspection. I and my property manager wanted to meet him.

The first investing mistake we have done.

After the contract, we put outside of the property to be advertised. Not the inside picture yet. Because the saga of the inside image was different totally. The building was in old condition and we needed a potential amount to repair it. It was round about $50-55k. and it was totally out of our budget. The reasons were that building was not our business model and we were totally not interested to fix even.

I met my property manager and the inspector. We all agreed on the point that this property will not go on the advertisement. I simply wanted to withdraw the deal. The only possible way to stick on that deal was if he reduces the price, but still, it needs a lot of fixes and repairs. I and my team were not interested in doing so.

What I and my team lost

We pull out the deal and lost a huge amount of $500. We were lost our all budget even we could not pay the fee to our inspector and real estate manager. The total we needed was $750 and we were out of it.

Is the Real Estate Market Actually Predictable?

As an investor or a casual buyer, you must know some real estate market rules. The known faith in real estate market is that it fluctuates in cycles. The prices may fall and rise at predictable intervals in the real estate market cycle. If you want to grow your real estate portfolio as a rental property manager or a seasonal real estate investor you should read this article. If these fluctuations are true then the question is, does that possible to time the market?

Annual Cycles and Multi-Year Cycles of the Real Estate Market

There is a difference between Annual real estate cycles and Multi-year real estate cycles.  In annual cycle some pricing factors are predictable. Annual cycles are also based on house and apartments sales for every season. Research showed that in Spring season 18.8% of houses are sold above the list price. Also, in Spring 32.7% of homes are on listing. While in Autumn season only 14% of houses sold above the list. And the listing in Autumn season is only 17.2%.  so, if we talk about the season, Spring is the better season for sale and listing as compared to the Fall season in real estate investment world.

Let’s jump on multi-year cycles. In multi-year cycle, you can predict more and you have to think more wisely. Investors usually think that the house prices generally rise, fall, or stable based on fixed cycles of the real estate. Let’s suppose, home prices may rise for the next 4 years and then fall for half a year, then again stabilized prices. Afterward, a new cycle of the prices and growth starts. A period of rise and fall in the real estate investing world.

Location is one of the most significant characteristic in multi-year cycles in the real estate investing world. Let’s suppose, A man who has started the real estate investment business in any city of Australia. That, most probably grows in 7-years cycle. And the boom period will be 4-years most probably. After a couple of years of stability or decline. The real estate market in the USA would be completely independent of these conventional cycles due to geographical, political, and other factors.

Some Significant Points to Consider

Some significant points you should consider that influence the real estate market changes, even with the conventional consistency in the cycle.

Economic conditions are broader

Prior to any other thing, the first significant point is any big change to the broader economy would impact the real estate home prices. The impact is very quick. For example, when the interest rates rise up, it makes harder to buy homes. The housing demand will get down instantly. And, the average prices of the real estate property will fall. If there is an emergence of a massive employer in any city, you will see the increase in the average income of that particular city’s residents and providing more career opportunities. You would see then an instant increase in the real estate property prices.

Installation and removals in the neighborhood

You also see some sudden changes in the cycle with the installation or removal of any new thing in the neighborhood. For example, if a new park with new technology or a new gym with new machines is introduced in the neighborhood. Or the area becomes commercial suddenly for any unexpected reason. There will be a big high shift in the real estate property prices and a dramatic change occurs. The prices will be increase and the value of the real estate property nearby will take a dramatic high turn.

If you erase any installation from the neighborhood like a school has closed or the park has destroyed, the prices will automatically go down.