These are the 4 Stages of the Real Estate Cycle

The real estate market functions on a cycle and having some information on each phase will be a great benefactor to investment decisions. You’ll also have a good idea on the possible risks with every transition. There are several advantages of commercial real estate that are special. Investors can invest across all the phases of the cycle. With some research you can make out whether the market is descending or close to a transition etc. Private equityand real estate investment are two very different classes.
The holding periods, return expectations, capital improvement timing, exit strategies are examples that can help you make informed decisions. Do you research on the following phases of the real estate cycle.



Recovery
The spatial demands are low and the velocity of leasing the property is minimal. This affects the occupancies at best. The rents are at a low and new projects are unlikely to be undertaken during this phase. The guise of recession makes it difficult to identify its beginning.
There are opportunities to buy low priced properties if you buy early in the phase. You should have contingency plans in your business strategies owing to the lower chances of leasing the property till the expansion phase.

Expansion
The market witnesses a surge in demand during the expansion phase. The job growth is strong and the GDP of the country comes back to normal. Consequently, rents rise as well and the occupancies increase. Unlike recovery phase, the surge leads to new constructions.  At some point the demand and supply reaches equilibrium.
Hyper Supply
As the terms suggests, the phase brings an oversupply of properties. The increased supply may occur due to fall in demand or over construction due to a change in the economy of the country. The rent growth raises, but at declining levels. The phase is marked by increased vacancies. Investors shouldn’t panic during the recession and wait out on their core properties as they usually pay back.
Recession
The rate of vacancies is high in this phase and supply outweighs demand. The rent growth is negative or below inflation rates. The rents go down to make the tenants stay. This phase is the best one to buy assets in distress at low prices. You need to be patient and wait for the cycle to turn again.

Even an elementary knowledge will decrease the risk on your investment. Don’t forget to do your research before you buy or sell any property.

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