Remember that amusement park ride, the little helicopter where you could push a bar back and forth to go up or down? It would spin around a circle, and if the operator threw a switch, you could ‘control’ the copter in a very small way.
As a child, it felt like you were really flying, all on your own.
If, when and by how much you actually moved was completely beyond your control. If the operator allowed it, you could then control only a minuscule part of the ride.
That’s what real estate investing strategies and tactics are like… that little bar inside the copter that makes you think you’re in control.
In reality, the market is in control. If, when and by how much you succeed (or fail) is determined by the market, not strategies or tactics.
That’s not to say strategies & tactics are a waste of time. They’re just subordinate to the market. Any successful investment plan begins with knowing your local market cycle, then applying the best techniques for that market.
You can’t build Generational Wealth in ‘Transactional’ markets, but knowing the right techniques at the right time for your local market is where it all begins.
The Market dictates what strategies to use.
Investing BLIND to the market is a lose-lose situation. You’re exposing yourself to excessive downside risk AND missing true Generational Wealth creation opportunities.
Nothing goes right when you’re fighting against the market. It’s like pushing boulders uphill, day after day.
Everything you touch seems to turn to gold when you’re in sync with the market. Just look at all the real estate millionaires who struck it rich simply because they were in hot markets, by chance.
Real estate is a great vehicle for wealth creation. Having a plan, skills, and tactics are helpful; they allow you to exponentially multiply your returns when the market is in your favor and avoid game-ending disasters when it’s not.
Everything begins with the market.
Tax Deed & Tax Lien investing is most successful following a prolonged market decline, after it has bottomed and started to appreciate. Investing in these instruments while the local market is still in a free fall is NOT the optimal time, nor is when the market has been in a sustained upturn for many years.
Investing in undeveloped (raw) land is a great strategy after the local market has been in a sustained uptrend. Land values can appreciate many multiple times faster than improved property, but the land is the quickest to decline when a market tops, and the last to appreciate after the market bottoms.
Short Sales work best at the end of the decline phase when banks are eager to unload their problems and large discounts can still be obtained. Waiting for the bottom better insures you’re not buying more problems for yourself and are positioned to ride the uptrend.
Wholesaling & Flipping. In theory, this is a low-risk strategy because you don’t take the title. Your losses are limited to your time and out of pocket expenses. In reality, this strategy becomes increasingly more difficult in falling markets because, in weak markets, buyers disappear along with declining vales.
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Last update of the article: 03/26/2020.