Timing is everything in real estate, that’s what all experts say. Purchasing your dream property might require you to look at many, many houses before you find the right investment for yourself. The number of houses that are available varies depending on what time of the year you you explore the real estate market. The truth is that understanding when you should be buying rental property does not have one definite and final solution. Buying rental property depends on the opportunity and the expectations the buyer has for that investment. Most people believe that summer time is ideal for buying a rental property due to the large number of houses on sale.
The end of spring is the time when all sellers start listing their properties on the market. For sellers, it makes sense because they know demand is higher in the summer, and they would rather wait till then to ensure they maximize on profits. This means that logically speaking, buying rental property in the summer season is not a good idea for real estate investors. This kind of dealing with competition, making multiple offers, and going through negotiations for income properties only pushes the prices upwards, so why even think about it? Why not wait until demand goes down to make your move as a real estate investor?
Summer vs. Winter Prices
Buying rental property in the summer or in the winter is not just a matter of preference. It is an important investment decision which can save you a lot of money. Waiting for the fall and winter seasons to make a move in the real estate is a smart business if you are looking to save money. For example, in the summer of 2014, the average price of homes was above $220,000, while in the winter of the same year the average home price dropped to below $200,000. If investors were to consider that they would save more than $20,000 just by waiting for a few more months, it makes buying rental property worth the wait.
It’s not that hard to understand why prices in the winter are lower. From an economic point of view, it’s all about demand and supply. Not all buyers of properties are real estate investors; in fact most of them are future homeowners looking for their first owned property. This makes most buyers picky, and not having a lot of buyers ultimately pushes the prices down for the properties that are listed in that period.
Buying Rental Property or Home
Paying those extra dollars in the summer can be worth the money if the buyer is looking for something other than buying rental property. Buying rental property means that the investor most probably already owns a home and is looking to invest his/her money in real estate. This makes it easier to choose a property because the purposes of it will be economic, i.e., to make money through as fix-and-flip or a long-term rental.
Buying rental property should be about saving you money and not finding ways to spend more. If the investor will save $20,000 by buying in the winter, this leads to a better investment. That extra amount you save is money in your pocket. It could be used to renovate the new property and make it even better. It can be used to pay a bigger down payment on your mortgage to save money in interest paid in the future.
If summer season is more expensive than winter for buying a rental property, then it gives investors a new angle of short-term money making. An investor can purchase a property in the winter when it’s the cheapest. If the property is considered lucrative for renters and buyers, then the investor can rent it for 7 months to make money, and then list it for a higher price in the summer season to make money in a very short period of time. The rental income and added value profit (real estate appreciation) would give the real estate investor a bigger budget for the next investment property that is on the market.
For homebuyers, the scenario is entirely different. When there are much fewer options and they are paying a vast amount of money for a first home, then it should be worth it. Worrying about the extra costs should not be the main concern, because for a homebuyer it is worth it for the quality and the property they are getting for themselves.
Sniping for Value in Summer Season
While the summer season is the most expensive time of the year for buying rental property, there is no reason that an investor should stop looking. There are many cases of real estate properties being listed on sale by owners for less than what they are worth because of dire financial reasons or needing to move to a different city. The fact that there are way more properties listed in the summer season means that as an investor who is looking to make profit out of real estate, you should be checking the best-valued properties.
Real estate experts will undoubtedly find it easier to identify properties that give return for their value. For investors who are looking to have the power of identifying and valuing properties in their city or neighborhood in any season of the year, there are tools that would help. Mashvisor’s interactive investment property calculator is a tool that can allow you to search for properties based on budget, rental profits, and mortgage rates which will help give you an edge over other competitors due to its one-click property analysis.
Conclusion
Buying rental property requires knowledge, experience, and above all commitment. Property buyers are those who influence most factors and aspects of the real estate market. They are the ones who push the demand or lower it causing a ripple effect in the real estate market as a whole. A good investor will know how to tiptoe around these situations. Summer and winter effects on real estate are caused by buyers behavior. This doesn’t mean that as an investor you should be fixated on that idea, opportunities can arise at any moment in the real estate. Identifying and taking advantage of these opportunities is what builds success in the world of real estate investing.