Is There a Best Time of the Year to Purchase Rental Property?
Yes, but get ready to slog around in slush and snow
Rental property can be an excellent source of income. It can be an apartment complex, single-family home, townhouse, or condo. Rental property provides consistent cash flow that allows you to potentially generate a passive income for as long as you own the rental property.
But owning rental property doesn’t come without a lot of hard work, and being a landlord isn’t for everyone. Even so, if you’re thinking of buying this type of real estate as an investment, there is one time “of the year” that’s best.
Why Is Winter the Best Time to Purchase Rental Property?
Wintertime is by far the best time of the year to buy rental property. Homes are more challenging to sell in the winter, especially if you live in the northern United States, where ice and snow can shorten the buying season and make moving more difficult. However, if a home has been on the market for a while and the buyers are motivated to sell, you may snag a good deal.
But, in freezing weather, you may also be less inclined to walk around the property and note any damage or obvious flaws to the house, condo, or apartment in need of repair. The property could be in bad shape, which is why it’s been sitting on the market for some time. It pays to take your time inspecting the property, as a long list of repairs can eat into your profits.
Almost 60% of annual U.S. moves take place between May to August, making spring and summer the most popular times of the year to move, according to IBIS World, Moving Services – US Market Research Report. Unfortunately, that also makes for a lot more competition from multiple buyers, making sellers less likely to negotiate. However, the opposite is true when the seasons change. In the fall and winter, fewer people are buying.
That means that odds are negotiations will go in your favor. Keep in mind that some sellers capitalize on the off-season to put undesirable properties on the market, making an inspection all the more important.
When the market is hot, sellers win. As a buyer, you’ll likely pay more for a rental property in prime buying times. However, in the fall and winter, buyers win—usually in the form of price drops. Sellers become more willing to negotiate, which equals lower prices. Property prices also tend to drop at the end of the year - especially around the Holidays.
In 2018, millennials aged 22 to 30 years old, had the largest rent burden, spending 45 percent of their income on rent”
Generally, there is much less real estate inventory in the fall and winter. People don’t want to move, so they typically wait to list their house, condo, or townhome in the spring and summer months. This is also true with apartment complexes. April, May, and June report the newest listings for sale, according to Zillow, but spring and summer months also post the highest prices. Another reason why fall and winter are the best “time of the year” to buy rental property. There may be less inventory, but overall prices are much lower.
Less visible repairs
One of the greatest concerns about buying rental property in the winter is not realizing the number of repairs needed to the property. If you live in the north, where snow and ice are abundant, a lot of underlying damage can be hidden around the exterior of the property. This can include cracks in the foundation, damage to decks and fences, dead landscaping and trees, and more. This can also mean expensive repairs once the snow melts.
Overgrown bushes or trees along the foundation can also give buyers a false sense that everything is fine. The best way to know the property’s condition is to ask for photos that the owner may have been taken before the first snowfall.
If you want to buy a rental property at the best time of the year, then you will probably be working over the holidays. Very few people are looking for properties around the two biggest holidays in the U.S.—Thanksgiving and Christmas. But, there are potential properties out there that sellers want to sell. If you want a deal, less competition, and better negotiation terms, shopping for a rental during the Holidays is well-advised.
Although buying rental property in the winter can be a bit more difficult in the northern part of the U.S., it can also pose some problems in the south, especially if you’re scanning listings over the holidays. Even in tepid temperatures, buying a rental in November and December can add up to big gains in terms of price, availability, competition, and negotiating power. So what is the best time to buy a rental property? November and December, no matter where you live. Want more significant returns on your money than a savings account? Check out the most powerful checking account - with no hidden fees.
Kathryn Pomroy is a journalist and writer specializing in personal finance, consumer banking, credit cards, and loans. She has written for LendingTree, Money Crashers, Quickbooks/Intuit and Bankrate.
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