Three Ways to Succeed in Equilibrium

If expansion, equilibrium, decline, and absorption were a family, equilibrium would be the middle child—the one accidentally ignored until it inexplicably acted out.

Parents are most successful when they can adjust their tactics to meet every child’s specific needs. Unfortunately, that’s usually easier said than done. It requires time, research, and hand-tailored strategies.

Below you’ll find the best ways to be successful during equilibrium and the warning signs of future trouble. That way, you can invest in this market phases confidently.

What is Equilibrium?

Equilibrium isn’t a buyer or seller’s market. It’s the strange phase in between the two where everything plateaus.

That might not sound too worrisome, but think of it like this: When you feel yourself getting a cold, you need to treat it quickly before it turns into something worse. Equilibrium is the same. You’re not necessarily losing anything in equilibrium, but it could be a sign of something worse in the future. If you don’t act wisely, you’ll be surprised when decline hits.

Tip 1: Pay Attention to the Data

Look at building permit trends first and foremost. Has the number increased or decreased over the last five years?

Say 1,200 building permits were approved per quarter in 2013. Now it’s only at 300. Those numbers indicate the end of expansion and the beginning of equilibrium. A 25–30% drop usually acts as a reliable red flag.

Population and job growth slow down during equilibrium, so keep an eye out for overdeveloped shopping centers and retail vacancies.

Finally. watch for days on market in the MLS. If you’re trying to invest out of state, it can be a little harder. Work with a turnkey provider or go to realtor.com and contact someone who has a lot of listings. And of course, examine macroeconomics because every area is different.

Tip 2: Sell Before Equilibrium

Once the market hits equilibrium, it gets a lot tougher to sell. If you can’t manage to sell your properties before the market plateaus, get out as soon as possible or be prepared to hold through the next full cycle.

You can potentially hold through if you’re in a hot primary market because they tend to bounce back first. Still, it’s better to sell and reinvest in a market that’s in late decline or early absorption. You’ll take fewer risks that way, but you’ll still be able to make great profits.

Tip 3: Buy the Right Properties in Equilibrium

You can get away with buying properties in equilibrium, but it has to be done carefully. Only buy significantly discounted, off-market properties in late equilibrium, or you’ll end up losing money.

Work with a turnkey provider for best results. They’ve been in the industry long enough they know how to get off-market properties.

Final Thoughts

It’s tempting to ignore equilibrium and focus on its more intimidating siblings: expansion and decline. But there’s a lot of value in this market. If you follow the three tips above, you’ll be more likely to profit.

Speak Your Mind

*