The Good, The Bad, and The Bottom: The Investor’s Never Ending Quest For The Elusive Bottom

By Nick Klein, HFO investment Real EstateEvery investor wants to find the best deal in the market. The fundamental, albeit cliché, principle of any business is “buy low and sell high.” Multifamily investing provides no exception to this rule. Buyers want to invest at the bottom of the market in hopes to ride the wave up and capitalize as the market returns.The problem is, nobody knows when we will hit the bottom of the market.It is perfectly natural to feel nervous about moving forward in a declining market. Chances are good that if you are completely comfortable with your transaction and the market is showing signs of recovery, you have probably missed the bottom. Bargain hunters waiting for the bottom of the market tend to make moves when they start seeing signs of improvement. Unfortunately, these signs of improvement also mean that the market has hit bottom and is now in the expansion stage. These buyers tend to miss the bottom in every cycle and never end up making a move. There are several schools of thought on this topic and a large number of opinions on this subject have surfaced since the most recent market decline. An alternative option, and certainly a more attainable goal, is to try to position yourself to buy within 10 percent of the bottom of the market.Looking back at previous down markets, how many of us would have loved to have purchased property within 10 percent of the bottom? There are several compelling reasons why one should not wait until the bottom to invest. The first and most obvious reason is; if you decide to wait, the best deals will be gone. The best deals are already out there and most won’t realize that until they are closed and the bottom has passed us by.Another reason is; interest rates are still historically low and are on the rise. If interest rates increase 100 basis points, the equivalent of a 1.00 percent increase, your purchasing power can decrease by hundreds of thousands of dollars.Opportunities are out there and the investors who accept that they can’t time the market are the ones who will stand to profit. More and more investors are showing interest in market participation and more offers are being written which points heavily toward a recovery. It takes brains to consider moving in a down market but it takes guts to make that move. Nick Klein is an Associate Broker at  HFO investment Real Estate