How To Avoid Sinking In The Shifting Sands Of Market ChangeHow To Avoid Sinking In The Shifting Sands Of Market Change

As we go from late 2005 into early 2006 there is no question that many, (but not all) real estate markets throughout the country are experiencing a slow down. Recent survey data provided by my newsletter subscribers from around the nation, are confirming news reports that real estate sales are slowing significantly. Atlanta is high on the list of major cities experiencing significant market changes and investor challenges.

It's high time for investors to recognize that the end of the current market cycle is at hand. Depending on your position as an investor you may find this end-of-cycle news to be either good or bad.

Highly leveraged investors who are dealing with rising taxes and flat rental rates are finding it tough going at present. But those investors who have stuck by fundamental investment principles are seeing this change as a real opportunity. The key is the ability to recognize a market change, and adjust buying strategy accordingly.

It is always critical to Investor success to "buy right". And in times like these, it is not only critical but tricky. It can be difficult to know exactly where "right" is in a shifting market.

Even professional investors can find it difficult to make the necessary adjustments in buying strategy when one market cycle ends and a new one begins.

The key to long-term success as an investor is the ability to buy right in any market. Cycles come and go. Values can rise dramatically and fall just as dramatically. The risk of paying too much increases significantly in changing markets. The ability to implement good buying practices is essential.

Most chief among these is the ability to correctly assess the market value of a property. In wholesaling, we call it the After repair Value or ARV.

Based on standard appraisal guidelines, determining an accurate ARV is a simple concept in principle. In practice it can be more difficult. In a shifting market where values can be flat or dropping slowly over time, it is very easy to over estimate the ARV.

One big issue that investors face in Atlanta and other cities, is property values supported by comparable market sales that are higher than the numbers being seen on the street in what I call the "real-time" market.

During the early months of a shift in market conditions, there is a time lag between peak-of-the-market appraised values and real time market selling conditions. One of the central keys to surviving market changes is the ability to recognize the difference between appraised value and real-time market value. Since offers are typically based on the anticipated ARV, it is critical to recognize these times when the ARV should be adjusted downward. Paying too much for a property is the one mistake that is almost impossible to fix without losing money and sleep. In a shifting market, it is an easy mistake to make.

The most common question I get from new investors is "How do I get into this deal?" The second most common question I get from new investors is "How do I get out of this deal?" You have to get in "right" in order to get out "right".***

by Donna Robinson
References and Bibliography

Donna Robinson is a real estate consultant, investor and author from Atlanta Georgia. Her latest project from Real Estate Investor University is called "The Real Estate Investors Guide To Financing Strategies". Now investors can see side by side comparisons of how each investing strategy will affect a deal, learn when to use creative financing and understand the fundamentals of "Buying Right". You can get this new, one of a kind buyers guide on her website at along with her free newsletter for real estate investors.

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