If you’re hunting for a rental income property at an attractive price, you might be wondering when the best time of year to buy an investment property is.
However, if you decide to go the traditional route of searching for an investment property, you may find the holiday months bring other presents in the form of less competition and better deals.
Here are five reasons why winter can be the best time of year to buy an investment property:
1. Less competition
While seasonal fluctuations in the real estate market may be more significant in areas with substantial weather swings, the holidays are still the holidays—sunny or snow-packed. Who has time to view properties when there's shopping to be done, gatherings to attend, and presents to wrap?
The answer: savvy investors who know the majority of their competition is planning to stay put until the holidays have passed or the snow has melted. According to The Street, in 2016 more than 85 percent of buyers who planned to purchase property intended to do so in the spring or summer.
Couples with children also tend to wait until the summer to move, which could mean fewer bidding wars during the winter.
This year, while everyone else is making gingerbread houses and standing in long lines at Best Buy, begin your investment property search while ugly Christmas sweaters are still fashionable.
2. Lower sale prices
Sale prices in metro areas are lowest in the winter and highest in June and July, according to a 2016 study by NerdWallet that looked at two years (2014 and 2015) of sales and listings from Realtor.com for the 50 most populous U.S. metros areas.
Sale prices—the amount a buyer actually pays—in the nation’s largest metro areas typically peak during the summer, dip in the fall and are lowest in winter. — NerdWallet
Findings from the NerdWallet study showed sales prices dropped nearly 3% on average from summer (June through August) to fall (September through November). In January and February, single-family homes cost almost 8.5% less on average compared to June through August.
Recent statistics support the fall trends cited in the 2016 NerdWallet study. As of September 2017, monthly sale prices of single-family homes dipped 2.1% from July, according to Realtor.com.
3. Time is on your side
Properties tend to stay on the market longer in the winter, data shows.
For example, take a look at the average age of inventory by days for the following sample markets in winter vs. summer months:
|Dec 2017||Jan 2017||Feb 2017||June 2017||July 2017||Aug 2017|
|Dallas-Fort Worth, TX||70||73||64||46||48||47|
*Data comes from Zillow’s Age of Inventory Report. Each Wednesday, age of inventory is calculated as the median number of days all active listings as of that Wednesday have been current.
If a property is still on the market as winter approaches, sellers may be more motivated to enter negotiations. This potentially puts buyers in a stronger bargaining position.
Alternatively, by the time spring arrives, more competition on the market could mean added pressure on buyers and less wiggle room for negotiations.
4. Motivated sellers
As Realtor.com points out, owners who put their home on the market during the winter may be more eager to move, and might close faster.
“Just like on the buyer side, there will be a subset of sellers that are motivated by tax reasons to get a deal done before the end of the year,” adds Zach Evanish, Director of Client Advisory Services for Roofstock.
5. Tax benefits
Which leads us to our next point: There is a real benefit to closing on your investment property before the end of the year, since certain expenditures can be written off.
For example, mortgage insurance premiums, financing fees, property management fees, travel expenses and other costs associated with closing are all tax deductible. Visit this IRS page for more information on deductible rental property expenses.
This goes both ways, too: When selling a home, a single owner can exclude from taxes up to $250,000 in profit from the sale of a home, and couples can exclude $500,000 (provided certain qualifying thresholds are met). As the April deadline to file approaches, these tax incentives may motivate sellers to accept lower bids in order to expedite the closing process.
Winter may be the best time to buy real estate, but any time of year is a great time to buy an investment property on Roofstock.
While the winter season may bring less competition and potentially better deals, rental property investors can take advantage of modern solutions that offer access to affordable, cash-flowing rental properties—no matter the season.
At Roofstock, we offer a wide selection of investment properties at attractive entry points year-round.
Rental property investors can purchase tenant-occupied homes in a variety of strong markets across the country, and start collecting rental income as soon as they close.
We even make property management easy. This allows buyers to separate investing from operations, and own rental property without geographic barriers. In fact, more than 90% of our rental property buyers live in markets that are at least 250 miles from where they are investing.
Even if you get swept up in the holiday hubbub and don’t get around to real estate investing this winter, don’t let the FOMO sink in: At Roofstock, we make any time of year a great time to buy rental property.