Can you make money when the market is red hot?

Hello! I hope you all had a great thanksgiving with your friends and families.

Today I want to answer the most common question I have been asked recently, “Can you still make money in this “crazy” hot market?’’

Short answer is yes, and a lot of it. But let me elaborate and explain how this is still possible.

First of all this isn’t a new question for me. I was asked the same question a lot about 10 years ago, then again about 5 years ago. Both times the market was “hot”. Multiple offers on properties was the norm, as was listings going off the market moments after being posted. You know, similar to the last few months again.

The answer has been the same: as long as the property is projected to cashflow and have healthy margins to account for future interest rate increases and even reductions in the rental market rates then yes, the asset will make money.

I wish I could be buying houses today at the price of that “hot” market 5 years ago, or even 10 years ago. It would be like buying assets half-off today. Crazy right?

So, do you think I’ll be asked the same question in 5 or 10 years again? My guess is yes and the answer will be the same, some assets will definitely make great returns and some won’t. Some assets will be worth much more as a primary residence than they will as an investment property. Every asset and market has its cycles and it’s your job as an investor to properly analyze every aspect of the asset before you buy it.

You need to have a clear understanding of what the plan is. Are you going to renovate it to add value and refinance? If so, what’s the best budget for the best return? Are you going to do short-term or long-term rentals? Do you have the experience or the staff to do it? (Refer to my previous blog to get more information regarding this topic).

This is why being patient and disciplined as an investor pays off. I’ll tell you about my last deal (at the time of typing this anyways). There is a house I just bought that I really liked when it was originally listed, but after being listed for a few days it had an accepted offer right away which ended up collapsing. Sellers lowered the price and got another offer right away. It also collapsed and I was able to come in moments after it collapsed with a much lower all-cash no subjects offer. After a very short back and forth we settled on a final purchase price about $200K below their original asking price. Yes, that’s crazy! But it took a little bit of fortune, good timing, patience, and being ready to step in when I saw the right opportunity.

Remember the saying “you make your money when you buy the asset”. This is absolutely true. Every time I buy an asset I know my game plan for the immediate future and have couple of different plans long term depending on where the market goes. Remember as well to stay nimble in your investment approach, the goal is always the same, but the strategy needs to adjust and adapt to take advantage of whatever the market is doing, even if it’s hot.

So how can you be ready to make money in any market? Preparation, research, having the right team and mentor, and by changing your mindset and leaving fear behind. Nobody ever won the game from the bench. Time to get in to play and win!

PS - I am currently negotiating another deal where I’ll make my money at the buying time. Curious how I do it? Contact me!

Thank you for reading.

Mucho amor,

Abe