This is a summary of the book Emerging Real Estate Markets by Dave Lindahl.
With the housing market in a slump, many investors wouldn't think of jumping in now. Investors should ignore the national headlines and focus on the fundamentals of any given market. While some real estate markets are cooling off, there are major hot spots throughout the country booming due to population growth and urban expansion. These emerging markets are where the next wave of explosive profits will be found. In "Emerging Real Estate Markets," Dave Lindahl shows investors how to find these markets to maximize their profits.
Real estate cycles exist in residential and commercial property markets. Rents, cap rates, and valuation are impacted by the cyclical nature of real estate. These cycles are impacted by different economic, financial and demographic factors. Investors want to know which submarket is hot, which submarket is losing market share, and where new supply will show up over the next five years. Basically, investors want to know what the future risks to an investment are. This book provides the answers.
Dave Lindahl identifies four market cycles: Seller's Market I, Seller's Market II, Buyer's Market I and Buyer's Market II. (These phases are also referred to as Expansion, Contraction, Recession, and Recovery).
- Seller's Market I (Expansion) - Property prices have corrected, rents and property prices begin to increase as late investors begin buying again and early investors are selling and reinvesting, good job growth ensures plenty of apartment renters and home buyers
- Seller's Market II (Contraction) - Property prices plateau then begin to decline, days on market stretch out as late investors realize they got into the market too late and now they're scrambling to sell, there are fewer buyers as economic indicators show lack of consumer confidence and flattened job growth
- Buyer's Market I (Recession) - Unemployment rates climb and peak, home prices decline and dip, foreclosures rise, the early contrarian investors begin looking for big discount deals
- Buyer's Market II (Recovery) - Unemployment rates stabilize, consumer confidence begins to rise, businesses begin to reinvest in their growth, home prices flatten or start to rise a bit, short sales spike as banks scurry to stave off impending foreclosures, and investors begin buying in earnest.
"At any given time, any city in the United States is in one of the four phases of the market cycle," explains Lindahl. "Being able to decode the market cycle is what should guide your actions as an investor-not what the headlines say."
This book is centered on how to identify where a market is in the cycle, and what the best investing strategy is for that part of the cycle. Lindahl shows how to identify real estate markets where the next wave of profits will be found. He explains how real estate markets cycle through ups and downs, and gives practical strategies for investing in markets at any stage of the cycle. He details characteristics of emerging markets and how to recognize them, explains how to rate the investment potential of any property, and gives advice on closing the deal, maintaining positive cash flow, and avoiding common mistakes.
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