Why Fall Is a Great Time to Invest in Real Estate
October 12, 2022
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If you're considering investing in real estate, you probably think of the spring and summer months as the best time to buy, but that could be a big mistake.
The cooler months may be a better time to invest in real estate. Not convinced? Learn why Fall is a great time to invest in real estate.
Why Fall Is a Great Time to Invest in Real Estate
Most people think the best time to buy a house is in the spring, but there's another even better time to invest in the real estate market: the Fall. Unfortunately, many people don't consider house hunting in the Fall because school starts, the holiday season is around the corner, and it's not a popular time to buy a house.
Here are the top reasons why Fall is a great time to invest in real estate.
The spring months are when sellers often get the highest price for their homes on the real estate market, but that doesn't necessarily mean it's a good time to buy. Once school starts, fewer buyers are in the market, which means home prices drop, and there are fewer buyers to compete with, making it easier and more affordable to buy a house.
How the Holidays Help
Most buyers don't want to deal with moving during the holiday season. This helps keep the prices down because there's less competition. However, when there is more attention on a home, prices increase because buyers compete and try to outbid one another.
During the holidays, most people aren't thinking about buying a house like they are during the summer rush. This means you might find more motivated sellers willing to negotiate in your favor than you would during a busier time.
Sale and Home Improvement Season
Fall is a time of many discounts, especially in the home improvement industry. If you invest in a home in the Fall that needs fixing up before you can rent it out or sell it for a profit, you might find sales on the materials needed.
Fiscal Year and How This Helps or Hurts Your Taxes
Some homebuyers add to their real estate portfolio for tax breaks at the end of the year. In addition, depending on your tax situation, you might be eligible for certain tax deductions, such as closing costs, discount points, and property taxes on your taxes if you run a real estate business.
Buying a house before the year ends can be a last-ditch effort to lower your tax liability and offset capital gains in other investments or properties you've sold throughout the year. You can also take advantage of the like-kind exchange. If you sell a property but reinvest the funds before the year's end (locating the new property within 45 days of selling the existing property), you can defer the taxes on capital gains.
Fall Weather Flaw Reveals for Buyers
It's much easier to see a home's issues in the colder months versus the warmer months. You also aren't seeing the home during its peak. For example, there likely aren't any flowers or lush trees. Instead, everything may look dreary, there are fewer people out, and you're more likely to see major issues with the home, such as a furnace that doesn't work well or rooms with drafts. Your real estate agent and a home inspector can be great resources to help you determine if the home has problems before investing.
Mortgage interest rates significantly increased over the last six months, but some experts believe we may see a slight drop in the coming months. As there is less demand for houses and home sales fall, interest rates may fall to make it more enticing and affordable for savvy home shoppers to buy a house.
The market slows down in the cooler months, and prices tend to drop. This isn't the case around the entire country, though. It varies in different areas. Check out the historical selling prices of homes for sale in the summer vs. the Fall, or work with reputable real estate agents who are familiar with the area and know the trends.
No matter how low a purchase price or attractive the housing market seems, it's not the right time if you aren't ready to take on a new home, even your dream home.
By the fall months, most real estate investors have figured out their personal finance situation and might be looking for another asset to add to their portfolio. You have the entire year to figure things out, and by the time fall rolls around, you're ready to invest and add to your portfolio.
Reasons You Can’t Go Wrong With Fall
- You'll likely face less competition.
- Many home buyers don't want anything to do with home buying in the fall or winter months.
- Many sellers are more motivated in the cooler months because the buyer's market has cooled.
- You won't feel so crowded or pressured at open houses.
- You will likely avoid a bidding war, which is great for first-time buyers.
Advantages and Disadvantages of Different Buying Seasons
Of course, buying a house in any season has advantages and disadvantages. Here's what you should consider in each season.
As we've discussed, the Fall is a great time to buy a house. The largest advantage is that there is usually a much lower pool of home buyers; this means fewer bidding wars and, therefore, lower sale prices.
Sellers often get desperate during the fall season when the busy summer months end and most families are settled. Sellers know they can't be choosy when selecting a buyer during the Fall because fewer are in the market. As a result, home sellers often lower their prices during this time or are more flexible in the terms and contingencies they offer.
On the flip side, while lower prices and competition are great reasons to buy in the Fall, you'll likely have fewer houses to choose from, which can be a downside. As a result, you might find yourself buying a house otherwise wouldn't or find that it takes you longer to find the perfect investment property.
Waiting until the winter months might save you even more money on a home purchase. Sellers brave enough to list in the winter usually do so because they are highly motivated and need to move house fast.
The problem with buying a house in the winter is the lack of inventory. Most sellers don't have open houses during winter because it's not worth the hassle. In fact, many sellers take their home off the market if it doesn't sell before the winter, so if you stumble across a house for sale, it might be one of only a few.
Spring is commonly the most popular time to buy a house, but it has its good and bad sides. It's good because you'll have many more options in homes for sale. But it's bad because many other buyers are in the market, which can drive up prices and create bidding wars.
You might also be subject to smoke and mirrors when buying in the spring. During the months when everything's in full bloom, people are outside, and houses look their best, you might be duped into a house with more problems than you realized and won't realize until Fall or winter.
The start of summer is just as busy as the spring. So naturally, buyers pay higher prices, and there's more competition, so you must come to the sale with significant qualifying factors and a hefty earnest money deposit.
As the summer fades, though, sales begin dropping, as do seller's expectations. If you can wait until August, you'll start feeling the benefits of buying a home in the Fall. Many sellers slowly realize their homes won't sell before the school year starts, so they either lower the price or offer more flexible terms and contingencies.
When Is the Best Time of Year for Investing in Real Estate?
If you're looking to buy an undervalued home and sell it for a profit, your best chances of making a profit are in the Fall and winter. You'll have fewer homes to choose from, but you'll likely pay much less for the home than you would in more popular seasons, like spring and summer.
When Is the Worst Time of Year for Investing in Real Estate?
It makes the least sense to buy a home in the spring or summer months if you're looking to maximize profits. You'll pay higher prices and have much more competition, forcing you into a contract you might not otherwise have chosen.
Is Now a Good Time to Invest in Real Estate?
Real estate is often a good hedge against inflation. If you can afford the payments and the stress of being a landlord on call 24/7, it can be a great way to build your portfolio and reach your financial goals.
Which Months Are Included in the Fall Buying Season for Buyers?
The fall buying season starts in mid-August and goes through early November. Prices are lower during this season, but sellers keep their homes on the market to find a seller before the cold winter.
The Bottom Line
Now that you know why fall is a great time to invest in real estate, you can create your strategy. You'll have a much better chance of buying a home at lower prices and increasing the profits you earn in the home, whether you hold and rent it or flip and sell it fast. Learn more by signing up and visiting our blog.
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