One thing that real estate investors love to do is analyze the housing market in an area of interest, and I’m no exception. Every minute spent learning more about the environment you plan to do business in is a minute well spent, right? Not quite. In my experience as a real estate investor, it’s way too easy to spend an endless amount of time thinking about macro factors when it would be better spent getting down to brass tacks on a deal.
Take Chicago as an example. If you really wanted, I’m sure you could make an argument supporting the idea of Chicago’s real estate as being a buyer’s or a seller’s market. And soon enough, I’ll elaborate on my ideas about that. But one thing that I’ll never do is to let my appraisal of the situation get in the way of competing in the Chicago real estate market.
Early in my investing career, I judged the market conditions in my hometown of Boston to be so favorable for sellers that I wouldn’t ever have a chance to make a profit as a buyer, even after accounting for fixing up homes or otherwise adding value. Everything I saw scared me off. After all, I’d be dropping so much on purchases that I wouldn’t have much leftover for renovations, and many of the homes there needed a lot of work to make par. And, nearly every property had several buyers competing, often bidding up prices even further.
As it turns out, shying away from the seller’s market was one of my biggest mistakes. I missed a series of huge opportunities, and I’m here to tell you that you don’t have to.
Why Chicago Is Unique
Let’s take a few minutes—but just a few—to analyze whether Chicago real estate is a buyer’s or seller’s market.
Real estate in Chicago is:
- In moderate demand
- Packed with looming foreclosures
- Comparatively cheaper than in coastal markets
- Largely of mid-20th century stock
- Highly variable in price and demand from neighborhood to neighborhood
Buyers have plenty of opportunities to pick up inexpensive homes that have a reasonable chance of being turned around with minimal investment. On the other hand, sellers in some areas may be able to command a high price for their homes, but struggle to find a buyer in other areas. That means your experience as an investor is going to depend on where you’re looking and what your role is.
If you’re a wholesaler, you won’t have any problems finding enough properties to work up a steady deal flow in Chicago. On the other hand, developers will need to fork over a lot of cash upfront to purchase land in up-and-coming areas where selling prices will be the highest, and there might not be enough turnover to be very picky.
In sum, there’s nothing about the Chicago real estate landscape that screams “buyer’s market” or “seller’s market”.
Do Markets Matter?
If the previous section left you confused as to whether Chicago is a profitable market to enter as a wholesaler or other real estate investor, don’t fret. Skilled real estate investors can make money regardless of whether a market favors the buyers or the sellers. But, their strategy may need to change a bit.
Think of it this way: in a buyer’s market, investors may find that there are more properties worth purchasing cheaply than they have money. And, there are likely to be many properties that will deliver subpar returns if bought, even after making a few improvements. That isn’t very scary, but it does mean that you’ll need to spend more time understanding the market to identify where demand is going to be the highest in the future before making a purchase. This is also where it helps to have a system for separating the wheat from the chaff.
In contrast, a seller’s market sees prices rising due to scarcity. For an investor, the biggest obstacles are avoiding overpriced homes when buying, and getting as much value as possible from sales. Both of those are easy to deal with when you have the right valuation software.
Leads Are More Important Than Markets
Once you understand the basic market dynamics, it’s key to get high-quality leads for houses. If you have a reliable source for leads that are likely to be profitable, a lot of the guesswork about how to handle the state of the market evaporates.
In general, decent leads tell you:
- Where and when there might be an opportunity
- The type of opportunity it might be
- Roughly how much capital you’ll need to approach the opportunity
- Who to contact to start engaging with the opportunity
In a buyer’s market, a lead might show you where to get a deeper bargain than usual. In a seller’s market, a good lead could tip you off about a home that’s likely to appreciate in value more rapidly than others whether or not you invest more into it. And for a place like Chicago, the right leads can do all of the above whether it’s a real estate buyer’s or seller’s market.
So, you should probably be spending your time and money on finding a source for quality leads rather than trying to figure out what kind of strategy will be successful in the given type of market. There’s nothing wrong with tailoring your strategy to the market conditions, but it’s far easier to do that after you have a list of decent prospects in hand rather than doing it before.
Finding the Best Leads Doesn’t Have To Be Hard
Becoming a HomeVestors® franchisee is one of the best ways to get a high-quality and reliable source of leads so that you don’t need to worry about whether Chicago real estate is a buyer’s or seller’s market. With the help of the HomeVestors real estate valuation software and the lead flow from the We Buy Ugly Houses® marketing campaign, investors have the opportunity to succeed in any type of market. And yes, that goes for investing in homes in Chicagoland too.
HomeVestors® franchisees can save time on market research and networking for prospects, and they also have access to a lending portal with approved lenders who compete for their business for on-demand financing for qualifying purchases and repairs. If you’re considering starting a real estate investing business, request information about becoming a franchisee today.
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