A question we frequently get asked is, ‘what happens if residential real estate prices go down after I’ve invested with your company?’ This is a completely valid question as everyone wants to try and ensure their investment is as safe as possible and will yield a positive return.
It’s for this reason that we’re focused on long term real estate investments. We buy houses with positive cash flow and hold them for the long term. This isn’t a situation where you invest and expect a large payout in two years. Most of the investments we make are designed to be held for five to ten years. Not only does this allow the mortgage to be paid down and for positive cash flow to occur monthly, but it also allows us to wait out any temporary housing downturns that may or may not occur.
Historically, housing values increase over the span of several years – it doesn’t happen overnight. This is why long term investing is imperative so that if there are blips in the market, you can easily ride them out without worrying about your overall investment.
Even in times of extreme crisis, the housing market is only expected to fall for 1-2 years before returning to its upward trend. During those two years, there is still cash flow coming in from tenants. Additionally, the mortgage is being paid down which will lead to a higher payout in the end when the market stabilizes and it’s time to sell. Long term real estate investments like this are inherently less risky than those that aim to complete the buy and sell cycle within a few years. That’s simply not enough time to build proper appreciation, ride out any downturns the market may have taken and develop strong positive cash flow. Time is crucial to minimizing risk and maximizing gains.
No one likes uncertainty but ultimately that’s part of the deal. If investing in real estate (as an investor as opposed to a homeowner), ensure the company that you are working with has the resources and experience to do everything in their power to minimize any and all risks so that both parties can look forward to a very positive investment and final payout.
Keeping an eye on progress with quarterly reports ensures that both parties are aware of the current financial situation and assess market trends to stay informed. Instead of worrying, what we can do is look at historical data, market trends and pay attention to what experts are saying. There are always signs of what is coming up next when it comes to real estate. It might not be the right time to be flipping houses, which can bring on a whole slew of issues, but a long term investment in real estate isn’t as risk-laden. House flipping and other short term investments in real estate are purely speculative and carry much larger risk since there are multiple factors that could result in a negative payout. Long term buy and hold in real estate is investing. It takes more time but risk management and the payout are worth it.
The advantage of smart real estate investing for the long term is that you don’t have to be alarmed every time the market takes a dip. Knowing that growing peaks are followed by short-lived valleys makes the risk feel much more manageable and far less like a crapshoot where you’re simply hoping for the best. Depending on speculation is high risk and unpredictable, it’s not a sound tactic for building wealth. Strategy, knowledge and patience are key to investment success. It’s exactly why your goals need to align with the companies you’re considering investing with.
This is why, if you are looking to partner on residential investment real estate deals, it’s so crucial to partner with a company who is vested in keeping up with the industry and who isn’t in it for the short term gain.
Investing with a company that wants to focus on extended appreciation, paying down the principal balance and setting up regular recurring monthly cash flow may be an ideal company for your prolonged success. Concentrating on the future-focused strategy allows you to best mitigate risk and ensure a maximum payout when the time does come to sell the property.
Yes, there is a chance the market may dip after you make an investment. That’s just a fact and nothing that should cause panic or worry. Knowing how market trends work and the growing nature of real estate should put you more at ease knowing it’s a long term strategy and not a bid for overnight success. There will always be risks associated with investing.
Partner with a company who understands your fears, but their fact-based and sound approach to investing puts you at ease. As a hands-off investor, you want to do your homework prior, make your investment and let your competent team handle their part.
Have more questions about partnering to invest in real estate? Drop us a line at info@artolinvestments.com
