How Does Seasonality Impact Rental Properties?
You may not be surprised to find out that seasonality does affect the real estate market, and these effects differ from season to season. Real estate is cyclical, so if you’re prepared, have done your research, and are a little more flexible, then you may be able to take advantage of these predictable indicators. In addition to the time of the year, when it comes time to purchase a rental property, there are factors like location, expenses, and return on investment that will help guide you through whether or not you should buy, sell, or simply sit tight and wait for the season to pass. If you are interested in buying real estate with your self-directed IRA, then speak with one of our non-recourse loan lenders today. We look forward to hearing from you.
Winter
Prices Are Lower in the Winter
Winter is synonymous with a great time to buy, favoring buyers who are ready to make the investment when there is a lack of competition. It is not uncommon for prospective buyers to only consider buying property when the weather permits, leaving many areas that are hampered by severe cold weather up for grabs for those who are ready. This doesn’t mean that real estate seasonality makes buyers and sellers go on a real estate haitis — instead, it simply means that those who are intent on buying property could be nicely rewarded for their efforts during the slower months.
While a low price during the winter puts buyers in a great position, it usually means that sellers are desperate. Sellers probably aren’t receiving multiple offers on a property because there aren’t as many buyers during the winter months, which means they are more open to making deals and negotiating, selling for lower than the original price. Once winter starts turning into spring, you will be happy that you remained active in the market, and now you get to relax a little while the stakes rise for others.
Winter is a Great Time for Beginner Investors
If you’re new to purchasing real estate, then you are approaching a great time to do so. One of the best times to invest in real estate is during the winter season, because of the better services offered by real estate agents. They will work with you and your budget to find you the best property that meets all of your requirements. First Western Federal Savings Bank has been helping people purchase real estate with their self-directed IRAs for over 40 years. Whether you are interested in residential property, commercial property, multi-unit property, or agricultural property, our non-recourse loan lenders are ready and waiting to help you. What’s more is that we offer exceptional services year-round. There is no seasonality with our commitment to customer service.
Considering the Upkeep
If you are planning on buying rental properties during the winter, then it is important to consider the upkeep of the property. Any property seems beautiful and desirable during the summer, but the same crop of land can look dramatically different during the winter. Dead trees and winter snow can make previously stunning yards into unappealing eyesores that will discourage many buyers. If you are the type of person that is up for a challenge — and if you’re into property investment, chances are, you are — then create a plan for dealing with the effects that the season leaves.
- Hire a professional and qualified inspector to take a look at the property, inspecting any potential problems that are hidden by snow or fallen leaves.
- Find some pictures of the property during the summer months when the foliage is in full bloom. These photos not only let renters know what to expect and give them something to look forward to, but it also gives you an idea of any landscaping needs that need to be planned for once the snow starts to melt.
- Think about snow removal from the sidewalks and the driveway. If it’s something that isn’t too bad, then think about making it a resident’s responsibility, or make it something that you take care of by hiring a snow removal service.
- Make sure all the appliances are more than up-to-date and work well during the winter. Have someone inspect your HVAC system to ensure that any residents or tenants moving in during these months are going to be warm in their new home.
The Downside of Buying in the Winter
There will likely be fewer houses on the market during this time, making the search to find the perfect house more challenging than it would be during the summer. The lack of housing inventory means it’s harder to find a home that meets your requirements, which is where you may need to lower your standards or look into renovation and landscaping opportunities. While there are tools you can use to help find properties in your area that do meet your requirements, if you are buying a property that doesn’t meet your standards, then add in the costs of fixing up the property to your desired preferences.
Summer
Just like the temperature outside, the housing market begins to heat up, and thus making buying property and selling property all the more competitive. Summer represents a special time in real estate market trends, as it is when people are actively participating in the housing market. Buyers aren’t restricted by the winter and they are fully able to look at properties in all their glory. Summer is notorious for having the most people look for new places to rent, buy, and sell, making the market intense and inherently very fast-paced. This creates a new atmosphere for both buyers and sellers, as they are competing against each other and other buyers and sellers, of course. This competition, however, isn’t necessarily a bad thing for those who are involved in the real estate market. As a matter of fact, it usually helps tip the scale for those who are prepared, offering a degree of leverage for those who are motivated and ready to pounce on the offer that appeals to them the most and meets their requirements.
For Sellers
If you are trying to sell your property during the summer, it is vital to have the area looking the best it can, or else it just won’t compete with the other properties on the market. In one of our last blogs, we outlined curb appeal, which helps make the property appealing for potential buyers and renters. You want to do everything you can to avoid your property from flopping in the heat of the market, so think about the features and design elements that make any home make a great first impression, and then apply them to your property. You want your property to stand out against the other houses that are also on the market. Here are some features that will make a big difference when trying to stay competitive in the summer real estate market.
- Attractive landscaping – Good landscaping takes good work, but it’s work that pays itself off. Good landscaping is more than just maintaining a green yard and keeping the weeds out of your gravel. Greet guests with flowers, as they will make the property seem more inviting. A low fence around the perimeter of the front yard, or along the sidewalk, is a great place for planting colorful flowers and vines that give the house vibrancy. Plus, planting seasonal flowers will keep the home colorful all year long, so when you are selling in the winter, the property won’t be dull. Keep all shrubs, bushes, and trees nicely groomed and pruned, as this adds a sense of extravagance to the home and will attract renters and buyers who want to uphold this appeal.
- A well-kept exterior – The exterior is the first thing that potential renters and buyers see, and if it isn’t well-maintained, then you are telling people that they shouldn’t even bother seeing the inside, because who knows that that is going to look like? Make sure the roof is clean, not damaged, and doesn’t have any nests or debris on top. Make sure the exterior walls of the home are in good condition. There is no chipping paint, the brick isn’t eroding, and the wood isn’t splintered or cracking away.
- Dress up the entryway – If you have potential buyers or renters about the enter the property, then the front door is the last first impression that you can “wow” them with. Make the front door stand out by painting the casing a different color than the door. Paint the door in a color that stands out, like a red or black, and add light fixtures and front-door accents will complement the look of your home and will excite renters and buyers. Creating symmetry around your door, which can be done by adding large planters, will also give a sense of elegance.
For Buyers
Before you enter the market, it is extremely necessary for you to understand what you can actually afford. Once you find this out, then commit to this budget amount, and don’t look at homes that are over your budget. Don’t rush to buy a property that is in your budget, but lacks a few of your requirements, making it fall below your standard. Rushing to buy a property — despite how much pressure you feel watching competitors take good properties off the market — doesn’t make much financial sense, and further, it could comprise your finances. If you are using your self directed IRA, plan to put at least 40% down. If you don’t quite have that amount saved yet, keep saving and when you do, you’ll be ready to make a move and purchase that rental house.
Real estate seasonality isn’t difficult to understand and use to your advantage, as the familiar patterns will prepare you for the seasons to come. If you have a good grasp on the market and understand your competition, then you are ahead of many investors. If you are new to investment property, then contact First Western Federal Savings Bank and speak with a non-recourse loan lender today. We would be happy to walk you through applying for an IRA non-recourse loan. We look forward to hearing from you!