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By Evelyn Long
Land is the one thing they aren’t making more of, which explains why it’s a favorite investment among the elite. Housing is a basic necessity of life. People also need places to meet and eat, shop, conduct commerce, and entertain themselves.
If you’re considering adding to your portfolio, you might ask if now is the right time. You have many factors to consider besides your budget. Where and when are your dollars most wisely spent? Here’s the best time of the year to invest in real estate.
1. Consider Peak Rental Season
The first and foremost qualifier? Summer is typically the best time to list a rental property due to high demand and high tenant interest. The majority of new leases are signed between May and August, which coincides with the end of the school year, good weather for moving and other pluses for tenants. Getting on the peak summer schedule means you’ll have a larger pool of applicants and less risk of vacancy.
New residential property purchases may be good deals in the off-season, since sellers will have fewer offers and homes are likely to command lower prices. If going this route, ask yourself if are you comfortable with the possibility of waiting a few months to sign a lease. Few families seek new homes in the fall or winter – they’re too busy getting their kids settled into school and planning for the holidays.
Whether you’re looking for a turnkey rental in the spring and summer or to buy and fix up a property in winter, peak season is always a good goal for a new lease. You can still find good tenants throughout the rest of the year, too. But it’s a matter of balancing your risk and setting yourself up for success by timing the market in your favor.
2. Look to Market Trends
Another factor to consider when determining the best time of year to invest in real estate is to observe the current market conditions. Right now, residential prices are falling. However, the Fed is raising interest rates, meaning you may pay substantially more over the cost of your loan if you finance your investment.
Investing during a seller’s market, like many did in the past two summers, is a different game than investing during a buyer’s market. On one hand, heated and competitive markets drive higher prices and home values, but the competition can be challenging for budding real estate investors. Take time to research market conditions so you know how to handle different scenarios.
3. Pay Attention to Current Events
Things were humming along as expected in the real estate world until January 2020. Suddenly, landlords couldn’t evict non-paying tenants, even though they still had mortgages to cover. As restrictions eased, many sought to recoup their losses and prices soared. The past 24 months have been a roller coaster, all thanks to a microscopic virus.
Wars, supply chain issues, and civil unrest can impact real estate prices nearly as much as pandemics. Pay attention to what’s happening with current events. Are you willing to take a risk that might pay off big, or should you take a more conservative approach? You might be more comfortable doing so in relatively calm conditions instead of amidst turmoil.
4. Go Property by Property
Okay, a basic but important caveat. Any part of the year can be the best time to invest in real estate if you stumble across a steal. It’s vital to assess the property itself. For example, do you have your eye on a unit that’s been on the market forever? If you have the requisite DIY know-how to fix and flip a home in need of cosmetic repairs, you might be able to make a depressed owner an offer they can’t refuse.
Likewise, remember that there’s only so much land. If you get a chance at a bargain in an up-and-coming area, it’s wise to leap. However, check with planning and zoning before you invest if you don’t have the deepest pockets. Some jurisdictions limit how long you can leave a lot vacant before building.
5. Mind the Tax Implications
This rule comes into play the most if you plan to sell an asset to acquire another. If you made money on your previous investment, you’d be responsible for capital gains taxes. Talk to your financial advisor or CPA about the best time to act.
However, real estate is unique. You might qualify for a Section 1031 like-kind exchange. If so, you won’t pay taxes on the swap, although you cannot claim a loss. Your advisor is the best person to turn to when considering such a move.
Knowing When to Invest in Real Estate During the Year
The real estate market has been interesting of late. You might wonder if now is the best time to buy. When’s the best time of the year to invest in real estate? It depends on various factors, so consider the above points when planning your business strategy.
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.
