Have you ever bought a property and completed the renovations without a hitch, but just couldn’t seem to get it sold in the end? It’s frustrating and costly to hold on to a perfectly marketable property just because there is a lack of interested buyers biting. There is no question that a lot of planning goes into effectively finding the best real estate markets to invest in and managing a home investing business. Beyond just tracking renovation dates and deadlines, however, planning ahead of the annual real estate sales cycle is key to maximizing your potential return-on-investment. While seasonal trends vary by region, it’s a good idea to set your renovation starting point so that the finish line coincides with the strongest seller’s market possible.
Home Sales Tail Temperatures
Real estate professionals have long tracked seasonal sales trends in order to make sharper market predictions and business decisions. Research shows that property availability, prices, and sales rise during the spring and summer and cool off through the winter nationwide—all according to the local weather. A number of theories have been put forth to explain this, from following school years to anticipating move-in weather, but the correlation of sales with seasons cannot be directly linked with any specific causation. Regardless, this data provides an advantage for investors who follow seasonal market trends to purchase at year-lows and sell at year-highs.
One way to pinpoint seasonal market upswings in your region is by tracking the number of mortgage applications, which are a 30 to 60-day precursor to the spring home sale surge. Subscribing to industry reporting publications can provide you with access to these figures so that you can decide when and whether to sell your investment property or keep it as a short-term rental. It’s important that you don’t just look at the national trends, however, as each regional market will have their own characteristics. In the northeast, for example, the selling season ramps up slowly in the spring and lasts only three months, so that the peak months account for most of the total home sales. By comparison, the longer warm season in Southern California provides a relatively extended selling season.
Lining Up Your Project Dates for Optimal Market Positioning
In order to be ready for your region’s selling season, you’ll need to project rehabilitation timelines and make sure the work is completed before the spring surge. Calendar management becomes margin management; you’ll have to know how long it takes you to close a particular purchase, rehabilitate the property, and the expected time on the market in your area. You should also make the time to investigate various investment property marketing techniques to ensure you reach your target homebuyer demographic in the shortest amount of time. Then, you will be positioned to reap the benefits of the hot sales season by renovating during the cooler season.
Here are some of the potential advantages to buying and renovating an investment property in the winter:
- Convenient Project Scheduling. Winter is the slow season for contractors as well so you’ll have the best chance at your project being their priority. You may also get a better price from contractors who are just trying to patch through financially until work picks up again.
- Faster Permit Approvals. Governmental oversight agencies are not as overloaded with permit requests in the winter because of seasonal building trends. This could make it easier and faster to obtain the permits required for your project
- Avoid Manufacturer Price Hikes. Products like lumber, windows, and cabinetry are often more expensive in the spring– when everyone else is remodeling. In addition, you may be able to take advantage of winter closeouts on appliances and other home products.
- Head Start on Exterior Projects. While it can be difficult to paint a house in damp winter weather, many other projects such as building porches, decks, and additions may be built in colder months.
The most satisfactory benefit, however, is that you will be positioned to get your property listed ahead of your regional market, which increases the chances of attracting buyer interest.
Getting Support When You Need It
Making sense of seasonal trends within your specific market may seem complex at first. But, that’s why many novice investors become independently owned and operated HomeVestors® franchisees. HomeVestors’ proprietary software can help franchisees evaluate whether an investment property is priced well enough for the investor to realize a potential return-on-investment even within ever-changing seasonal conditions.
In addition, franchisees benefit from training in proven investment strategies and one-on-one mentoring by seasoned investors who are familiar with local contractors and real estate trends. Before getting in over your head with an investment property rehab, reach out to learn more from a HomeVestors representative today.
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