Profiting in a Seller’s Market

It’s a Seller’s market and a strong one at that.  Experts are citing that we are experiencing  a housing shortage with inventory levels at the lowest in 20 years.

What does this mean for investors?

Yay…it’s a seller’s market. But I say the same thing when it’s a buyer’s market and even when it’s a flat market. The fact is that it is always an investor’s market if you know how to change and adapt.

The huge advantage of a seller’s market is that housing prices trend up. According to a recent CNBC article, median home prices are up 7% from a year ago. Good rehabbers know that they can keep pushing the market – even using their own previous sales as comps. Landlords know that their property will quickly increase in value expanding their equity and net worth.

With a housing shortage, rentals become more in demand and rents increase as well. Wholesalers’ deals fly off the market to both rehabbers and landlords. So everyone is making money.

The big disadvantage is that In a Seller’s market it is harder to find deals. There is less inventory and you are competing not just with other investors, but with home bargain hunters looking to live in the houses. Demand for houses is also increasing due to all of the home renovation shows on TV. More “newbies” believe they can do it too and are flooding the market place. Therefore prices are higher and there is little low-hanging fruit to pick.

Savvy investors in a seller’s market recognize that they may be paying more on the front end, but they’ll make it up with lower holding costs and increased prices. Frankly, as a rehabber, I’d rather have it harder to find a house and easier to sell. I have no holding costs when looking for a deal. I do when I’m trying to sell.

The way to maximize your profits during a seller’s market is simply to become the seller. Locate inventory that you will either rehab; rent out; or sell to other investors as a wholesaler. I realize that is much easier said than done.

You must become a marketing octopus. No longer can you rely on just the MLS or the pre-foreclosure report to supply you with leads. You have to have your tentacles out in multiple areas grabbing up deals before others even know about it.

Don’t feed in the same waters as all the others. Focus on the off-market deals that no one knows about. Identify direct mail lists that others don’t know about. Identify smaller target areas and market extensively in that area. Use as many different mediums as you can afford: direct mail; billboards; bandit signs; flyers; local shopper ads; pass out your business card.

You never know what will bring you a deal. My wife suggested we place flyers at the local pak n’ ship. I thought it was useless, but only $20/mo to have a little box. In just 3 months we got a deal. Definitely worth the $60. We couldn’t rely on this one source to feed our business; and that’s the point I am making. Don’t look for the one perfect way to find houses. Reach out in as many ways as possible.

Here’s some motivation for you…when you have deals in this type of market, you’ll sell them faster and for more money. Buyers will literally be competing for them. Become the source of inventory and you’ll be rich!

Expect abundance,

Lou Castillo

 

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