When Is the
BEST TIME
to Buy Deals?
By Marco Santarelli, CEO of
Norada Real Estate Investments
A
lot of people
ask me, “When
should I buy?
What part of
the real es-
tate cycle should I buy in?
Should I buy in a down mar-
ket? Are the values going to
keep going up/down? When
should I buy and where is the
cycle right now?”
Realty411Guide.com
You want to find the
.
biggest possible ratio you
can find. That means you
want to look for areas
with lower prices and
higher rents. There are
areas where you can find
low prices, and there are
areas where you can find
high rents, but there are usually only a
FEW areas where you can find BOTH
low prices and high rents. Those are the
areas to take a closer look at.
Generally, you’ll want an R/V ratio
of 1.0% or more. You can still purchase
property with a ratio as low as 0.7% and
generate positive cash-flow, but it’s best
to find an R/V ratio of at least 1.0%.
Look for property you can purchase ei-
PAGE 83• 2014
ther under market value and/or that will
produce the highest cash-flow return on
your investment. If I have to choose
between cash-flow and equity when
buying passive real estate investments,
I recommend going for cash-flow. If
you start off with good cash-flow, those
profits can often outstrip the equity
build up — and do it in a few short
. course, this will vary be-
years. (Of
tween markets and market cycles.)
It is possible to find property that will
provide you both if you know where
to look. Remember that markets are
never static, and change slowly enough
that you can identify them with a little
effort.
Continued on pg. 110
reWEALTHmag.com
F S
But these are the wrong questions to
ask – it’s not “WHEN should I buy?”
It’s “WHAT and WHERE should I
buy?” In other words, you should
always be buying NOW.
There is always a place, somewhere
in the country that is either appreci-
ating in value or is an undervalued
market. And the reasons may be local
economics; it may be demographics,
or it may be related to
its location. Maybe
it’s because the pop-
ulation is growing in
those areas, or maybe
it’s in a town where a
large industry is mov-
ing in. For example,
there are markets (like
North Dakota or the
Eagle Ford shale in
south Texas) where
a large number of
oil companies are
expanding, creating a
large number of new
jobs which creates a
need and demand for
more housing (purchase and rentals).
Those are just a few things to look
for in a good market.
But one of the most important
things to look at in an investment
property is its income. This is mea-
sured by looking at the property’s net
cash-flow, but a quick way to do that
is to look at the Rent-to-Value Ratio
(or R/V ratio for short).