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  • Writer's pictureKira Witherwax

The New Deal

Updated: Nov 22, 2022

The past year and a half have been tough for buyers. Houses have been selling quickly and above asking price. And often with multiple buyers competing for the same property. We are seeing some stabilization, but the market certainly hasn’t switched in favor of buyers and with few homes available, we don’t expect it to.

In any market, I get calls from investors looking for a deal. They want me to keep an eye out and let them know if I see anything “on sale” or “at a discount”. Here’s the thing. This has not been the market where any buyer, even cash investors, are getting a crazy good price. And that is a huge understatement. Even as we start to find some balance, we are still far from what most buyers would consider a deal. Especially an investor. So instead I offer you a perspective shift. If you’re a real estate investor would you consider investing in commercial real estate? Follow me for a minute. What environment creates a situation where real estate is sold at a discount, where deals are found? Usually risk. For residential investors it’s seller risk. The potential risk is that an investor buys a property planning to flip it to resell for a higher amount or to rent it for steady income. Either way an investor in a buyer’s market (one where there’s “deals” to purchase property) takes on the risk of not being able to resell or rent out quickly. Remember, it’s a buyer’s market in this hypothetical. Because of this they are willing to pay less. And they are able to pay less because there are many homes available in a buyer’s market.

So, what do we have now? No “deals” for residential, single family real estate because there’s a low risk in a seller’s market. You could liquidate the asset as needed. So, if you’re a potential investor, I ask you to look for the risk. That is where you will find the deals. Where is the risk now?

If you know anyone that owns their own business, or even just works for a smaller company, they’ll tell you the last couple of years have been challenging. It depends on the business of course, but the overall feeling is that people are uncertain of the economy and therefore risk adverse. They’re nervous. Rightly so, you may say. Yes, risk is real. And it’s certainly not for the faint of heart. Here’s another example. We all know we should buy into the stock market when it's down, but left to their own devices, the average person never does. Because that doesn’t feel good. It feels insecure. It’s risky. The average person, without a financial advisor’s guidance, will sell when stocks are low and buy when they are high. It’s hard sometimes to see the forest through the trees.

However, if you are an investor looking for real estate that might be selling at a discount, you won’t find it in the residential market. It’s worth looking at a broader picture. And maybe diversifying your real estate portfolio into the commercial arena. It’s certainly not for everyone and if the thought of it keeps you up at night, definitely don’t do it. But if you do decide to jump in, make sure you surround yourself with a team of professionals advisors to guide you on your journey.

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