Gauging When It’s the Right Time to Invest

I asked what you (my LinkedIn community) wanted me to share more about, and one question repeatedly came up over every other topic:

With interest rates fluctuating almost daily, is now the time to buy or not to buy real estate?

It’s not a simple yes or no question. In my opinion, this is a great time to start "kicking tires" and exploring what’s available in the market—especially for beginner real estate investors. A lot of the biggest names in real estate today started in similar market climates.

?Imagine the real estate market like it’s an engine-powered boat on the water. As the boat moves forward, it leaves a ripple effect in its wake. In this case, those ripples represent the opportunities in the market. When the water is too wavy, it can be hard to figure out where the water will settle and you might risk jumping in and getting crashed against the rocks. However, for those that see where the water is going to settle, they can ride the momentum to the result of huge financial gains.?

This principle goes far beyond commercial real estate. IBM, Microsoft, GM, and many other corporate powerhouses were started during recessions. Warren Buffet once said to be “fearful when others are greedy and greedy when others are fearful.”

What is the market doing?

So, how do you know where the water is settling to decipher when it’s the right time to invest and where to invest?

One big question for commercial property investors is whether or not property prices are about to drop due to the market driving buyers out, in which case, investors would rather get the same property for less in two months. This is one of those “ripple effect” factors that you have to keep an eye on.

My personal opinion? Yes, property prices are fluctuating and will continue to fluctuate, but I don’t think they will drop as much as many think. The financial shifts aren’t only affecting the commercial real estate space, they’re going to drive many home buyers out of the market resulting in more demand for rentals. As people turn to rentals, that ultimately increases monthly rates and cash flow for the investors who own those properties. For investors finding the right opportunities, this is a great thing. It means their properties will increase in value because there’s more cash flow coming in monthly.

Is the market still fluctuating? Yes. Are there amazing financial opportunities for the right buyers? Undeniably.?

Shev v’al taaseh. This saintly adage means if you don't know what to do, don't do anything at all. Don't make a move simply to make a move... wait until you know it's right, then go all in. I’ve mentioned it many, many times, but my father’s advice to “follow the winds” is one of the greatest anchoring points for every outlet of business.?

Finding the right opportunities?

Panera used the 2008 financial collapse to kickstart a new era of rapid growth for them. Restaurants were hit hard, just like most businesses during that time. The Dow Jones US Restaurants and Bars Index was down nearly 12%. Just like today, many restaurants saw it as a time to pull back, but Panera saw the ripples of change carrying them to greater profits than ever.

Panera’s stocks rose by 46% and were ranked the best-performing restaurant stock of 2008. Between 2007 to 2010, their stock rose by 81%. Amazing!

While everyone else was pulling back, Panera was more aggressive than ever. They were buying up properties and aimed to open a new location every five days. Panera opened up over 100 new stores in 2008.?

This is some of the best advice out there (investor or not) from their former CEO, Ronald Shaich:?

"We understood that the fundamentals of the marketplace really haven't changed … Unemployment went from 5% to 10%. There's 90% of society that is still employed. I couldn't capture all those people that are unemployed. They weren't eating out at all. All I could do was stay focused on who my target customer was, and not be reactive."

When the financial market is making big shifts, there’s always more than meets the eye. While the world scatters, new pockets of opportunity are created for those with eyes to see them. So, as you’re looking for opportunities and determining if now is the time to invest, you’ve got to pay attention to all the factors. It’s not just about interest rates—though they do play a large role, and of course, low-interest rates are preferable.?

The most successful investors think differently. They understand there are always opportunities to be had, the real challenge is identifying exactly where and what they are. They ask the right questions, questions like:

• If we have a financial collapse, will the need for this type of property increase or decrease?
• Are there clear opportunities to increase the cash flow in the near future?
• If unemployment rates rise, what will the other 80-90% of people who are still employed be doing? What will they need?
• Is this area on the rise? If a recession hits in the next six months, would it change the answer?

Do your research. Get to know the facts. There are opportunities out there, but it's never wise to jump in just for the sake of jumping in. Look where the water is settling, and until you feel confident, don't move.?

Bottom line: Now is a great time to keep your eyes wide open looking for those opportunities. They will be there, and the investors who find them will win big—as is usually the case when we have huge market fluctuations like this.

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