In the world of investing, the idea of buying low is almost cliché. For those interested in real estate primarily as an investment, however, the most predictable low point in any cycle is apt to be the winter. Buyers leave the market for a host of reasons, and that combination of effects drives prices down.
Where’d the Buyers Go?
Winter presents a number of challenges for what might be thought of as the traditional buyer. Especially when it comes to residential real estate, winter means being stuck in the middle of the school year. Families don’t want to dislocate their children, and that dampens enthusiasm for buying houses. Commercial real estate can be depressed because interest tends to peak in the run-up to the holiday and summer seasons. If someone interested in CRE hasn’t already bought in advance of Christmas, the upside may not be there again for half a year.
Properties also don’t look their best in winter weather. A retail location might not seem appealing with mud tracked through the entrance. Likewise, leaf-free trees and snow piles don’t always show off the best features of a residential location. For an investor, it’s critical to look past those short-term issues and see potential.
If one is thinking purely as an investor, this is all good news. According to real estate investor Than Merrill, “It’s safe to assume more homes will be priced to sell when inclement weather prevents most prospective buyers from leaving their own driveway.” Additionally lack of competition drives down prices, and in many cases sellers may be thankful to see money come into the market. With sellers looking to unload inventory and investors trying to get good deals, this can be a win-win.
Investment Needs Don’t Change
Let’s say an investor is looking to purchase a house that’s already a rental property. Tenants at rental properties behave according to the same standards as home buyers. They like to see nice places in warm months, and they don’t want to move their kids. For an investor, this means two things:
• The property will be cheaper.
• The tenant likely won’t move within the next three months.
The buy-low strategy is one of the most proven ideas in all of investing. When buying real estate, the time to buy low is in the winter. For flippers, the sell-high months are still ahead. For long-term investors, it’s a great chance to reduce the initial cost of acquisition. Winter is a great season for real estate investors.