It will happen sooner or later in your career as a real estate investor: you will need to sell a property quickly to get access to capital but will be faced with a down market.
Real estate has a proven track record as one of the best investments in the long run. Therefore, many investors rely on their real estate assets to get them through a rough patch. Unfortunately, unlike stocks and bonds, real estate can’t be easily liquidated. It may be particularly challenging to turn a property into cash in a down economy.
It is one of the most significant downsides of real estate investing. Real estate is, by nature, cyclical, which is why we recommend keeping a diversified investment portfolio. However, should you find yourself in need of some fast cash, here is our strategy to sell a real estate property in a down market.
Price the property appropriately for a down market
When it comes to real estate, there are no bad properties: there are only bad prices. It can be a tough pill to swallow, especially for a real estate investor who relies on selling buildings for a profit as a source of income. There is only one way to sell quickly in a sluggish market: you will need to lower the price of the building. Sometimes, it means barely breaking even on your investment, or even accepting to take a loss to avoid a further downfall.
Real estate is a long-term investment. Therefore, the best strategy, whenever possible, is to hold on to the property until the market picks up again. If it isn’t an option, make sure the building is listed for a price appropriate for the current market, not accordingly to your initial projections. When faced with a down market, you may need to hire an appraiser to get the most accurate pricing estimate. You will also need to manage your investors’ expectations accordingly.
Market your assets strategically
If the market is not in your favor, you will need to go the extra mile to market your assets enticingly. Play up the attributes of any given property. A common strategy is to offer several types of buildings at once and to evaluate their performance.
For example, if you own rental apartments, vacation homes, timeshares, and corporate office buildings, put one of each asset on the market. Depending on how quickly each asset sells for and the ROI, you may choose to liquidate one class of investment property to save the others.
Remain emotionally detached
Emotions can run high in a down market. As an investor, you are likely bearing the brunt of the stress. You need to sell assets in adverse conditions, manage the anxiety and expectations of your partners, and probably deal with your own economic pressure as well. However, you cannot attach an emotional value to the price of the property.
No matter how much effort you have put in the property, never lose track of your objectives. Always remain professional towards your partners and potential buyers. In a down market, lowball offers are the norm more than the exception. Instead of feeling insulted by these bids, keep emotions at bay and counter their offer according to the market condition.
Selling a property in a down market is part of the real estate business. Like all forms of investing, it retains an element of gambling. A good investor should recognize the time to cut his or her losses and accept that not all investments will perform as well as expected. Whether it is a calculation error on behalf of the investor or global market conditions, there is always a lesson to learn from such failed deals. Remain humble and professional during the transaction, and you will likely be back on your feet soon enough.
What is your best advice to an investor faced with a down market?