Real Estate Investment Is All About Supply And Demand
By JD Esajian on February 19, 2016
Multi-billionaire real estate investor Sam Zell says “it’s all about supply and demand.” So where is the supply? Where is the demand? How can real estate investors tune into this power law, and create more wins?
Zell is famous for being an outspoken investor. He has been through three tough periods in real estate, and has come out on top with billions. He has headed the nation’s largest apartment REIT, had a real estate office that needed to open 24 hours a day to pack in all of the waiting buyers, and sold a portfolio of properties to hedge fund giant Blackstone for a little under 40 billion dollars. Clearly he knows a thing or two about real estate, and the dynamics of business. If he says winning is about supply and demand, it’s worth paying attention to. So where is the supply and demand in today’s market? How can regular individual investors tap into it?
Wholesale Properties
There is a huge need for real estate wholesalers and wholesale properties today. Investors are hungry for more deals. Rehabbers and especially buy and hold investors are eager to scoop up more inventory while prices are rising and interest rates are low. There is no shortage of demand for good wholesaler deals. If you can bring the supply it should fly off the shelf.
A Home for Investment Dollars
Hundreds of billions of dollars are to be invested in US real estate in 2016. With turmoil around the globe, and energy and stock markets taking a beating far more capital could be unleashed this year than expected. Browse online real estate forums for a few minutes and you’ll discover multiple investors struggling to decide what to do with the money they are being offered to work with. It’s a great problem to have. Yet, it clearly shows a serious need and demand for experienced investors that can skillfully and profitably put money to work quickly.
Somewhere Affordable to Live
There isn’t enough affordable housing. They aren’t really making more affordable housing either. The lure of the higher profits of luxury units is just too much temptation for most. Millions of dollars which should be dedicated is being redirected to alternative projects under expanded definitions of ‘affordable’. Rents keep rising, and apartments are far from easy to get into. In fact; it can be far harder to rent than to get a mortgage and buy a property today. If you can provide affordable housing, and make it efficient and affordable to get into you’ll see demand and business grow as fast as you can supply it.
Prime Real Estate
Some aren’t happy about the rising prices of prime properties in New York, Miami, and San Francisco. Perhaps ironically the wealthiest investors continue to be happy to pick up the most expensive properties on the market. They are confident that someone else will come in and pay even more for them. If land is limited, and housing is limited, prime real estate in the best locations is even more limited. There are really no rules when it comes pricing these properties. It’s about more than square feet, bedrooms, and the art on the wall. It is about bragging rights, and real estate which can be rarer than gold or diamonds.
Controlling Supply and Demand
What happens if investors don’t have the lead on ultra-prime real estate to sell, if the affordable housing supply they have isn’t in the trendiest urban tech hub of the moment, their approach to investing isn’t exactly what those with capital planned to put their money into, and they run into those that haven’t yet learned to appreciate wholesalers?
Some individuals let things happen to them. Others dig in and find the supply, bring the solution to meet the current demand, or if necessary create demand for the supply they do have. Look at the development of Disney. Look the demand for real estate created by the annual Berkshire Hathaway shareholder meeting. It has gotten to the point where Buffett had to recommend visitors started using Airbnb to find a room. That spurred a boom in hosts. Now Buffett is embracing technology and will deliver the meeting via video on Yahoo. He is leveraging the latest tools, casting a wider net, and is reaching a larger audience at which he is sure to create more demand for his companies’ various products via his recommendations.
Summary
Winning in real estate is all about supply and demand. Supply the demand. Or create the demand. If you can’t there will never be ‘a good time’ to be in real estate. If you can offer value, and you can find the help to market it, then there has never a better time to be in real estate.