"Part 2 - Yes, this system works in a slow market"

I've heard speakers and authors say this often only to hear the sad stories of new investors getting burned for following the author's 'checklist' verbatim without considering the changing conditions of their market.

Let's be direct. Real estate investing for the past several years didn't take a lot of intelligence because the appreciation, easy financing, dirt bottom interest rates, and low inventories. Your due diligence consisted of a decent estimate of FMV, check for mold, rot and clear title. Other than that, buy it.

Most of the 'make millions in real estate guides' were written in the market upswing. So consideration for the slowing market and excess inventory were not taken into account.

A simple statement in those books, like "Verify the Fair Market Value (FMV) with comps (sold comparables)" is not enough. Why? Because the comps are only part of the picture.

In a hot market, comps may be all you may need to determine the marketability and FMV of the property but not in a slowing market.

The game changes in a slow market and you must change your due diligence, holding strategies and end game to match.

Here's an example of how your due diligence must be modified for a slowing market.

Comps (Sold Comparables) is one of the numbers that you must carefully question during the due diligence process. In a declining or lateral market, comps still carry their weight but I care more about the "Day on the Market" (DOM). In other words, how long are the properties sitting on the market before they sell. In the last 6 months have the sold comparables been discounted?

Protect yourself from bad deals in a lateral or slowing market by obtaining the following data and the analyze it see the trends. This is help you avoid mistakes and work as a negotiating tool with the seller.

How many houses are for sale in the same area?
What is the asking price?
___________________________________

How many homes sold last month?
DOM for those homes?
What did the house sell for?
Was the home discounted?
Seller Paid Closing? How much?

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How many sold within the last 3 months?
DOM for those homes?
What did the house sell for?
Was the home discounted?
Seller Paid Closing? How much?

___________________________________

How many sold within the last 3 months to 12 months?
DOM for those homes?
What did the house sell for?
Was the home discounted?
Seller Paid Closing? How much?

___________________________________

How many sold within the last 12 to 24 months?
DOM for those homes?
What did the house sell for?
Was the home discounted?
Seller Paid Closing? How much?

Once you obtained the data, ask yourself:

• What is the developing trend?
• Are homes taking longer to sell?
• Are homes being discounted more?
• Are the sellers paying the closing costs (how much)?
• Are the properties taking longer to sell? If so, factor in the additional holding costs.
• Do you have the capital resources to hold the property in the case it doesn't sell?
• Can I afford the home in spite of the trend?
• Can I factor in an attractive discount in order to make the property more compelling to buyers?
• Should I consider other acquisition methods to avoid the risks that comes with taking title in the slow market?
  

Once you complete these questions, you should be able to make an 'informed decision' instead of just assuming you'll walk away with a profit.

Final Points to Remember:

• Don't seek decisions from your team, only information.
• Let your team provide the information allowing you to make profitable decisions and accept the responsibility.
• Invest the time to reveal the trends and get all the data before moving forward.
• Factor the trends into your acquisition price.
• Ignore the trends and you'll pay the price.
• Seek out other acquisition strategies that will allow you to profit in a slow market.
• Have additional exit strategies available in order to move the properties that do not sell.

While the techniques may work in any market, certain 'parts' may not because they were written in a strong bull market. Be prepared to challenge the information you're reading and be aware that you must adapt it to your current and future market conditions.  Buying real estate without regard to the trends can leave you stranded and broke.

Be responsible. Don't drive invest drunk. 

RIYAHSDREAM12