The real estate market is, as any other industry, very volatile. Even though it has a good track record, the industry depends on the macro and microeconomics, demographics, interest rates, etc. which makes downturns impossible to be avoided. When investing in real estate, there is not fully certainty on what the outcome will be and there could be a downturn from one moment to the other. But is the glass half empty or half full? That's the real question you should ask.
Chasing deals should be considered a sport from which professional athletes are the ones who wait till the storm comes and a housing crisis hits the market in order to buy. After the crisis in 2017, lots of new investors entered the real estate industry by purchasing properties that increased their value a couple of years after. Ever since last year, Miami's real estate market has shown a slowdown, with lower price, a large inventory and rising interest rates. Some owners don't want to embrace it, but pragmatism should be taken into account.
Residential real estate normally suffers the most. Commercial, for instance, balance its property value with production and the revenue generated. However, residential is only based on appreciation, which is not always the case. For the residential industry, the negative effect decreases proportionally to the increase of the property price. This leaves ultra-luxury condos, like Faena House condo, Setai Residences or Apogee condo as the less damaged during a housing crisis.
Another good advice to avoid being unprepared for the next downturn is to be extremely cautious on the property total price before purchasing. Remember that the property price tag is not the only cost you will incur. There are maintenance fees, taxes, mortgage costs, etc. Be aware of how much would be the rental income of the targeted property and then contrast that cost with the rest of your portfolio, income and other expenses. This is the best way to line up a plan to have the money to invest during the downturn.
Planning is the key and being prepared to purchase when a downturn come is the best way to face the issue. For those how got stuck with a property that lost its value during a recession, the most important lesson should be to be patient to avoid a property loss.