Investment Strategies That Succeed in a Seller’s Market

By Evelyn Long

Real estate investments are a good source of revenue. In a seller’s market, your property can sell quickly because the housing demand exceeds the supply. However, the stiff competition means you’ll have to work harder to buy these properties.

Some investors will look to sell at higher margins, and others will need alternatives to entering a competitive local market. Wherever you are with your portfolio, here are some investment strategies for successfully navigating a seller’s market.

1. Refinance Current Properties

Current lower interest rates make now a great time to refinance your properties. Doing this can decrease your monthly payment, so replace your existing mortgage with a new plan that has a better interest rate.

You can use the money saved to help finance your next investment property. You can also use the cash to make upgrades to your residence.

Here are some other reasons to refinance your mortgage you should consider:

• To shorten your mortgage
• To convert to an adjustable-rate or fixed-rate mortgage
• To tap into your home’s equity

2.  Get an Edge Over Residential Buyers

With the shortage of homes for sale, you are facing a tough market. You are competing with residential buyers looking to find their dream homes. To get ahead of the competition, do background research on the type of houses currently on the market.

Go out and visit these properties or look online. This will help you determine what type of features you’re looking for.

Find an excellent real estate agent to help you navigate the market. They can alert you when new property listings are available. Make sure to check their references before making a final decision, as property investors have specific needs for market purchases.

Also, try not to zone in on one property at a time. With houses selling quicker, you want to be prepared in case your offer gets declined.

Here are some other tips to help you get an edge over your competition:

• Except to compromise
• Have your finances lined up
• Offer a strong closing deal
• Keep the home inspection simple
• Make the offer personal

3. Look Into Commercial Real Estate Opportunities

Investing in commercial real estate can provide a more stable source of income. With a traditional residence, if the tenant leaves, your cash flow stops. In commercial properties, there are multiple sources of income to offset any vacancies. These buildings also can produce higher income depending on their size.

The value of residential homes became uncertain during the pandemic, while some niche commercial markets gained popularity. The life sciences are one example. COVID-19 helped to drive the need for more laboratories and research facilities. These are also a more stable investment because scientists can’t do their work from home.

The pandemic also increased people’s online shopping habits. In 2018, about $517 billion was spent on e-commerce sales, boosting the need for warehouses. As this trend continues to grow, investing in a warehouse could be a smart option.

Before investing, you want to do some research. Here are some tips for investing successfully:

• Calculate the return on investment of your property
• Understand the local real estate market
• Familiarize yourself with industry terminology
• Weight the financial costs
• Pay attention to demographics

4.  Investing in REITs

A REIT is a real estate investment trust. Through the stock market, you invest in a company that owns property that generates income.

Here are some of the different types of REITs:

• Retail
• Residential
• Health care
• Office
• Mortgage

You can get familiar with the real estate industry without buying a property. This is helpful for those who don’t have the necessary funds and is good in a seller’s market where competition is high.

Here are some additional benefits of REITs to consider:

• Competitive long-term performance
• Substantial, stable dividend yields
• Liquidity
• Transparency
• Portfolio diversification

5. Crowdfunding

Crowdfunding also allows you to enter the real estate market without buying physical property. You can help fund a specific project for a portion of the returns and choose what you want to invest in.

Crowdfunding also allows you to work directly with real estate developers and managers, and you might even be able to have some voice in decisions made. It also allows you to start with a lower investment size.

By not owning the property, you are free from maintenance responsibilities. Crowdfunding is another good way to diversify your portfolio.

Here are some crowdfunding sites to get you started:

• Streitwise
• Fundrise
• RealtyMogul
• Cadre
• 1031 Crowdfunding

Summary

Investing in properties can give you that extra source of income. However, with a seller’s market, the competition is stiff. Keep these strategies in mind when making your next purchase, sale or investment.

Author

Evelyn Long is the editor-in-chief of Renovated. Her real estate work has been published by the National Association of REALTORS®, Rental Housing Journal, and other online publications.