Top Real Estate Strategies for Growth During a Market Shift
It’s time to face the facts. While the economy at large may not be in a recession, the real estate industry has been struggling. Housing starts are down 4.2%. The Home Builder Index is down another 8 points to 38 points. And overall home sales are more than 34% lower than they were this time last year. What’s more, the National Association of Realtors reported a record 1.5 million members in the month of December. Meanwhile, there were only 910,000 homes on the market in total. That means there were more agents looking for clients than there were homes available. Needless to say, the competition is fierce right now, and not every agent is going to make it. If you want your business to thrive and not just survive, you’re going to need to adjust your strategy. This article explores top actionable strategies for growing through a real estate market downturn.
Before you dig in, some housekeeping rules to get into the right mindset.
- Prepare for change. What worked for you during a booming market is not going to be effective today. You need to be prepared to pivot, cut attachments, and try something different.
- Don’t pay attention to other agents. The harsh reality of real estate is that most agents will retire their licenses within five years…And that’s not because they’re retiring. This means that doing what the average agent does is a sure recipe for failure. And if you’re looking at top performing agents, you’re still going to trip yourself up. This is because what they’re doing today is not what they did that got them here. So, keep your eye on your goal and keep moving forward.
- Prepare for hard work. You’re not going to be rewarded for a job done pretty well. You need to wow them or you’ll lose them. And you need to do it every time. A down market provides the best opportunity to sow the seeds for later returns. But, you’ll need to work hard to nurture them.
- It’s not all gloom and doom. Market shifts weed out the agents who don’t want it badly enough and strengthen those who are dedicated to their business. What’s more, there are unique opportunities in down markets that aren’t available during a boom. Ultimately, a real estate market downturn can be the best thing that happens to your business.
Okay. Now that you’re ready, let’s talk about strategies for growth in a real estate market downturn.
1. Explore Additional Revenue Streams
Every day, people inherit properties, move for work, get married, get divorced, have kids, etc. Motivated buyers and sellers are out there, in every market. In fact, down markets bring forth additional opportunities and unique real estate needs. You simply need to know where to look and how to best situate yourself to benefit from them. Here are several such opportunities that may be available in your market.
Get Into investment real estate
Sales are down and so are home prices. This means that it could be prime time to shop around for hot real estate deals! Yes, mortgage rates are high right now, which makes it tougher for some people to get approved for a loan. However, the well-to-do may not have as difficult a time here. And they may want to take advantage of the reduced sticker prices of properties. So, while higher interest rates may be a deterrent, those with a long enough outlook may still want to invest. After all, once the market rebounds, as it invariably always does, they can refinance for a better rate.
Single-family, multi-family, and vacation rentals make excellent investment opportunities in a down market. Higher mortgage rates mean that many people who would otherwise be looking to buy will continue to rent. So, you can count on rental income to pay the mortgage and property maintenance costs. Meanwhile, the property can help with tax write-offs. This makes long-term buy-and-hold properties an excellent opportunity for investing. Short-term flips, on the other hand, can be risky. This is because they require timing the market accurately, which is not advisable in a down economy.
Bonus Tip: To find these well-to-do investors, consider offering an opt-in exclusive list of hot deals, which you maintain and update. Those who are open to looking around will be happy to sign up or refer a friend. This way, you provide value to prospective clients, grow your sphere of influence, and establish yourself as an expert in your preferred market.
Explore property management as a service
As we touched on above, it’s often the case that a downturn in the real estate market props up the rental economy. This is because more people are forced to rent for a little while longer as they get priced out of homeownership. So, if you help people invest in a rental property, you can also help them manage that property for a monthly fee. As an added bonus, many of today’s renters will become tomorrow’s buyers. By managing their current home, you ensure that you have a direct line for when they become ready to buy.
Offer property tax appeals
This is a clever opportunity that you should not overlook. In a declining economy, many homes will have inflated valuations. This is because as properties drop in value, government assessors aren’t in a rush to collect less money in taxes. However, if you file an appeal and demonstrate that a property has dropped below its assessed value, the homeowner will be granted a tax reduction. And, as the agent representing the homeowner, you will collect a commission on the savings you get for your client.
In case it isn’t abundantly apparent, here’s why this is brilliant:
- You get to build a relationship with a homeowner who only stands to gain money by working with you.
- The process of filing appeals is easy to scale. Once you do it for one homeowner in an area, it’s easy to multiply again and again for others.
- You get paid while ultimately building relationships, which further reinforces your business.
Pro Tip: Make sure to review county assessments and run a CMA on properties whose value appears overestimated before contacting the homeowner. This is a great service to offer, but not to everyone, at all times. Otherwise, you run the risk of creating a ton of speculation work that ultimately does not yield results.
Offer credit repair services
As lenders tighten their requirements for loan qualification, more people will be priced out of the real estate market. However, planning ahead can help you save deals for when things turn again. Consider working with a financial planner or good mortgage professional to help people who are on the cusp of eligibility improve their credit. Not only do you build a relationship with a future buyer, you also strengthen your relationship with a finance professional who could refer clients to you in the future.
2. More prospecting, less marketing
If you don’t know the difference between prospecting and marketing, check out this article. If you do, you probably understand the role that each strategy plays in a successful real estate business. And while both marketing and prospecting are crucial, they are not equally important at every point in the market cycle. Calibrating your efforts to better fit market demands can make all the difference.
In short, during a market downturn, buyers and sellers are even more apprehensive about making a misstep. As such, trust becomes more important than ever between client and agent. And you are less likely to establish trust through an impersonal introduction. Therefore, your lead generation strategy needs to step away from inbound tactics like advertising. Instead, spend more of your time and energy connecting with people face-to-face and building those relationships. When the market picks up and you start to have more capital to spread around, you can reallocate more resources to inbound strategies once again.
3. Reevaluate Business Spending
Speaking of reallocating resources, if you want to grow your business through a real estate market downturn, you must reevaluate your business spending. We’ve built a budget template that you can download (completely free). However, here are some starting guidelines for the meantime:
- Reevaluate all previous expenses. Did you invest in something that did not add GCI to your operation in the last period? Consider trying something new instead. It may not be right for your market, right now.
- Plan for everything. A common mistake agents make is underestimate their expenses and overestimate their GCI. However, during a market shift, your budget will be less forgiving. So, plan for even the smallest expenses to stay within your budget. This will also help you identify where an expense is not essential and can be eliminated.
- Shop around. Goods and services that don’t directly help you grow your business are negotiable. This includes your car, website, the software you use to manage your business, etc. Negotiating and shopping around for options can help you save a lot of money. You can then reinvest that money into an area that will do more for you in the current climate.
- If it helps you generate business, don’t consider it an expense. Some investments into your business offer a reliable return. Your job is to find these opportunities and invest as much as is reasonable in order to maximize your growth.
Here’s one such example: Have you heard of Parkbench’s 200% satisfaction guarantee? They’ve developed a model for real estate business growth that guarantees a generous return on your investment. If you try their system and do not generate at least six transactions in your first year, they’ll not only give you your money back, they will actually double it.
4. Stand Out From The Pack
You’ve read the stats. Nearly 90% of real estate agents fail in the first five years of business. Despite this, the ones who succeed get more than their fair share of business. That is because they’re willing to take risks and stand apart from the pack. In order to grow through a real estate market downturn, you need to be prepared to do things differently and chart your own course as well.
Our favourite strategy is a return to real estate roots. At its core, real estate is a local business. It thrives and dies with local connections. This is why we cannot overstate the importance of getting out there and getting involved in your local community. Check out the top geo farming strategies for 2023 for perspective and inspiration on local outreach. However, if you want to cut to the chase and establish yourself as a Local Leader® in your community, check out the Parkbench Local Leader® system.
They only work with one agent per neighborhood, so it’s a way of getting ahead of your competition. What’s more, they’ve built a value-first system of real estate lead generation that sets you up for long-term success. That means that you get to meet more people in your neighborhood by offering them something of tangible value first. Parkbench is a hyper local platform for deals, events, and news, which you give as a gift to your community. And, as we mentioned earlier, success is guaranteed. If you don’t generate at least six sales in your first year with Parkbench, they’ll give you double your money back. That’s how confident they are that it works.
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Conclusion
A real estate market downturn can come as a rude awakening to agents who have only worked though a market boom. However, if you are savvy and prepared, you can use these times as an opportunity to cement your standing as an industry leader and actually grow your business. The truth is that market downturns are part of a healthy economy and actually present new opportunities for growth. This article outlined our top strategies for not only surviving a shift in real estate but thriving through it.
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