One couple made over $19,000 in cash flow from a single property due to excellent positioning. If you want to negotiate advantageous property deals, like what they did, you have to learn more about hotspots.
Charley and Bianca were business owners who came to us to master a new reliable revenue stream. The trick was getting a good deal and doing it in a way that wouldn’t require them to step away from their business.
So, we leveraged the knowledge of hotspots.
This helped Charley and Bianca to find a great duplex property in a high-demand growth area. And due to its low vacancy rates, the new real estate investors generated over $19,000 in positive cash flow from a single property.
Of course, not everyone can get similar results. We find that this happens when investors don’t have a clear understanding of real estate hotspots. Thus, they can’t define it or identify optimum buying windows.
If you have the knowledge, you can use hotspots in the market to get better returns. You can also leverage that knowledge to boost your negotiating power and get better deals.
But for this to happen, you need to learn about specific pros and cons and typical hotspot traits in different market cycles. The following will offer the information you need.
What is a Hotspot?
Don’t think of a hotspot as an actual place.
While there isn’t a clear definition of what a hotspot is, it doesn’t mean that you can’t define it as regards the property market.
The general description you get is that a hotspot is a market that’s going to outperform other markets.
A good example here is Hobart, which achieved growth over the past couple of years. It’s not a market that will last forever, but it did fit the hotspot profile.
Hobart outperformed on growth, yield, and demand. And when you get increased interest from people in an area, everything increases in kind – from the buyer activity to the number of demands to house volume. These are all classic indicators of a hotspot.
Now, the issue we see is that some investors find it hard to negotiate on a property in such places. But why does it happen?
It’s because of one of the challenges of being in a hotspot – you get a lot of competition. And at some point, a hotspot becomes a seller’s market. It means that owners have more leverage and can push to get better deals.
With that said, let’s dive into this subject further.
What a Hotspot Means for Your Negotiating Power
Let’s talk about your negotiating power.
How do you quantify it in a high-demand market?
Imagine you’re at an auction with no other bidders. You’re the only bidder negotiating with a seller who really wants to sell.
What would you say of your chances to get the right price for you?
While unlikely, you can get close to it. Much closer than you would if you had 30 or 50 other bidders driving up the price.
Here’s why that happens.
When there are other offers or there’s competition, people get emotional. Buyers, in particular, convey more emotion. Sellers, on the other hand, patiently wait to get right.
The same happens in real estate.
If you want to get a good deal, you need fewer competitors circling the same investment properties as yourself. It’s one of the many things that helps you boost your negotiating power – it’s basic supply and demand.
Now, does this mean that you can’t buy in a hotspot? No.
You can do that and still get good deals. However, you just might not be able to get the best deals for your portfolio.
The one thing that you have to remember is that hotspots have different stages. That is, they have degrees of hot.
You see, an area doesn’t become a hotspot overnight.
First, it starts warming up. Then, the heat builds up to the point where it blows the top off the pressure cooker.
You can see the same thing happen in other markets, whether it’s gold, shares, or anything else.
The reason we mentioned these stages or cycles is that they’re crucial to boosting your negotiating power. Knowledge of hotspots is your biggest advantage when you’re trying to make a deal.
This brings us to our next point – how to identify your optimum buying window.
Your Optimum Buying Window
An optimum buying window is the best period to enter the market. Although you hear things like “don’t try and time the market” all the time, you still need some discipline.
If you want to maximise your returns, you need the discipline to do your research and commit to being a professional in the real estate space.
So, what is the optimum buying window?
The ideal time to invest is when an area is nearly warming up. It’s that turning point before it becomes a hotspot.
Here are two reasons for finding an optimum buying window:
- Buying too soon can lead to years of sunk costs before an area starts heating up and you see some returns
- Buying too late means spending more money and you risk getting very little yield or growth
Educating yourself on property hotspots can give you an understanding of how markets move. It will help you position yourself to be in the right place at the right time.
The fact is that market movements and progressions are cyclical. If you can figure out the next logical progression in a market, you can identify hotspots just before they start lighting up.
Discipline and Knowledge Will Help You Win Negotiations
Every real estate investor dreams of buying property in a hotspot. But some of them do it for all the wrong reasons or at a bad time.
Owning property in a hotspot can be terrific for your portfolio and wealth-building ambitions.
However, if you really want to get the best return, you have to exercise more discipline and gain the knowledge needed to give you an edge in negotiation.
Keen to explore your own property strategy?