From my personal experience as a real estate investor, I’ve developed a distinct approach to buying investment properties. It’s essential to note that every investor has a unique strategy that suits them, which is fine as long as it proves successful. One rule of thumb most investors agree upon is understanding the optimal time for securing more investment properties to amplify the financial gains.
WINTERTIME REAL ESTATE INVESTMENT
As familiar to all real estate agents, the timing for selling a property varies greatly. Winter usually ranks as a less favourable time for house sales. Reasons for this trend include the holiday season, harsh weather conditions, and the hassling prospect of children switching schools midway through the academic year. Consequently, less house relocation happens in the year’s later months, making property sales more challenging.
However, these circumstances present an excellent opportunity for real estate investors interested in expanding their portfolios with more investment properties.
When I began hunting for our initial investment properties, I took the year-end into account, drawn to several advantages like an abundance of properties, slashed prices, smoother negotiations, an extended rehab window, and tax benefits throughout wintertime. Initially, others deemed my approach unconventional, but as I explained my rationale, it started making sense and got other investors searching for properties throughout the winter, too. To echo this, investing in properties before the year-end seems a smart move!
TRICKS OF THE SEASON
Being a real estate investor can be challenging during the prime selling seasons. Typically, investors propose lower-price offers than primary home buyers, putting them at a disadvantage. Conversely, during off-peak seasons, specifically in the year’s final months, investors enjoy some leverage.
One advisable action is the evaluation of historical data in your proposed purchase areas. Such insights will provide valuable knowledge on the number of homes listed each month per annum, the average sales price for specific property types monthly, rental rates per preferred parameters and many other metrics based on your search criteria. Proper due diligence before investing in a property is always a smart strategy. After all, there’s a season for everything!
PRICING ADVANTAGES
The final months of the year are often dismissed as an unsuitable time to list a house for sale, thereby encouraging lower initial asking prices. Price movements are heavily influenced by supply and demand. Typically, a house listed for sale in the spring fetches a higher price than the same one listed in autumn or winter. Furthermore, properties that have been listed for more extended periods tend to fetch a lower sale price. This insight, coupled with understanding the timing, can be beneficial for real estate investors.
BARGAINING POWER
Most properties listed during the year’s latter half are done out of necessity, leading these sellers to expect lower-priced offers. Investors capitalize on this knowledge and are more likely to wait for sellers to negotiate more favorable terms. Although this can disadvantage the seller, it benefits the investor significantly.
ADDITIONAL REHAB TIME
Owing to a decline in the rental market during winter, securing tenants generally takes longer. Therefore, any new property acquired in the year’s closing months might stay vacant for a while. Even though missing out on the initial months’ rental income, it offers you some time to renovate the property. If you’re a shrewd investor, you can use a limited budget efficiently to maximize this rehabilitation period.
TAX PERKS
Investing in properties towards the year’s end also comes with tax benefits. The tax laws vary from state to state and change frequently, so keeping abreast of these updates is crucial.
Furthermore, securing an investment property towards the year-end could result in a better tax write-off opportunity as you haven’t accumulated any rental income yet. When I made my purchases towards the year-end, I benefitted from tax write-offs on various fronts like the amortized purchase price, closing costs, property taxes, property insurance, mileage, advertising, and utility deposits. Always consult the IRS website each year to stay updated on current regulations.
CONCLUSION
Seeking new investment properties, provided you’re prepared to negotiate, willing to roll up your sleeves, and practice patience, can be mutually advantageous. Generally, the year-end is my favorite period to search for new properties.
Have you ever bought investment properties towards the year’s end? If so, what drove you to do so, and was it a successful step? Please share your experiences with us.
