Historically, real estate investing in the winter presents a mixed bag of opportunities, just like unpredictable winter weather. On the upside, you might find motivated sellers and reasonably priced houses to buy, along with contractors who have slow-season availability to work on your project. On the downside, you need to contend with snow and cold temperatures (driving up your utility bill during renovations) and generally less housing inventory to consider.
Seasoned investors will tell you it can be well worth the effort to work hard during the winter season to find those low-priced homes and motivated sellers.
Here are 5 pros and cons of real estate investing in the winter season.
5 cons of real estate investing in the winter
Snowy property search
Snowy project work
Limited pool of buyers or tenants
Searching for properties during snowy weather
If you don’t like the cold and snow, a winter property search may not be up your alley. While you can start your search online, you’ll want to see a prospective investment property in person whenever possible. Snow can conceal conditions and red flags you might easily notice any other time of year – a crack in the foundation wall, drainage issues, a sidewalk or driveway in poor repair, to name a few. One workaround is to look online for images from previous property listings to help you research the property condition.
Traditionally, fewer sellers choose to put their house on the market during the winter season. Motivated sellers from the summer and fall may change their mind or decide they don’t want to deal with the extra wintertime hassle of keeping the property ready to show. Or they may decide they don’t want to move after all.
You can turn this con into a pro by leveraging your hard work and commitment to marketing: If you had a seller contact you before the winter slowdown, but their house hasn’t sold yet, by all means, follow up. Efforts to systemize your follow-up will be key to your ongoing success. You’ve had a conversation with this seller, which puts you higher up the scale of trust and rapport. Reach out to those potential sellers to see what they are thinking – you might be able to put a deal together.
Project work in the snow
Winter can be a slow season for many contractors, even the best ones. This might mean better availability to complete necessary work on your new property; you also face the extra challenge of keeping the property clean after repairs are done. That new carpet you installed doesn’t look quite as good covered in snow and mud, plus you need to. Keep the house adequately heated to ensure the plumbing doesn’t freeze.
Fresh paint takes considerably longer to dry in cold conditions, and you may not be able to paint the exterior at all until the weather improves. Keep the house temperature at 65 to prevent plumbing from freezing and encourage the paint to dry, and a few extra space heaters and fans will ensure air circulation. Despite best efforts to protect carpets with plastic runners, you may need to re-clean the carpets. Alternatively, make carpets the very last step on the renovation list.
Showing the property to best advantage
When you have potential buyers visit your listing during the winter months, make the most of the opportunity. Arrive early, so you have time to take care of a few maintenance items. You may need to shovel and salt the sidewalk and driveway. Make sure to turn up the heat – 65° is chilly for a walk-through, plus you want to show that the furnace is in good working order. Have those plastic runners out for the new carpets, and do your best to gently direct your potential buyers or renters to stay on the plastic. Another tactic is to place area rugs down to protect the new carpet.
Limited pool of buyers or renters
In general, people avoid moving in the winter if they can – but with a little marketing, you can still attract a buyer or new tenant. Take advantage of the free listing tool on Rentometer to generate interest in your property; you’ll want to do more than a one-yard sign or placing it on the MLS. If the market is slow, you may need to offer moving incentives such as the use of a truck or helpers.
It’s not impossible to sell or fill a rental in the winter, but pay close attention to how your price point compares with other available properties. Do your due diligence to find the sweet spot for your listing price. Your real estate agent can run comparable sales.
5 pros of real estate investing in the winter
1. Less buyer competition
2. Motivated sellers
3. Lower house prices
4. Faster purchase process
5. Favorable financing
Less buyer competition
As a real estate investor, you’ll always face competition from other buyers. In the spring, summer, and fall, properties can move quickly, selling to other investors, homebuyers, or large private equity firms. You’ll typically see less competition from homebuyers in the winter but still encounter other investors eager to score a deal. With that in mind, winter usually presents opportunities for an active investor to build a strong portfolio and acquire projects to work on in preparation for the spring market.
If you use the MLS or Zillow, which pulls MLS listings, pay close attention to a property’s number of days on the market. The longer the house has been on the market, the more likely the seller will negotiate on price, repairs, and even household items they’re willing to leave behind. It’s a good time to get creative as an investor and shoot for the moon – you might score a great deal and help a seller move on in the process.
Lower house prices
House prices traditionally drop during the winter due to more days on the market. According to the NRAN, the gap between January home prices and March home prices averaged 21% up until 2019. While January is still lower than most of the spring, the gap was only 6% between January 2020 and March 2020. To you, as an investor, this trend means you need to stay active with your marketing. Start by following up with sellers with whom you’ve had contact with in the past. It could also make sense to send letters of inquiry to owners of vacant properties and landlords. Keep in contact with your real estate agent and ask her to keep an eye out for possible deals.
Faster purchasing process
The average time to close a signed contract during the winter is 30-45 days, versus 60 days or more during the rest of the year. Title companies, real estate agents, and mortgage lenders are not as busy during the winter, which means you can close more deals. This, of course, depends on the state of activity in your local real estate market, but in general, winter processing moves a little faster.
2020 has brought with it many challenges, but one unexpected benefit has been favorable interest rates. As of November 2020, a qualified homebuyer’s rate for a 30-year fixed conventional loan was under 3%. This financing landscape could change, but traditionally, loan rates are lower in the winter than during the rest of the year.
Ask any seasoned investor, and they will tell you it’s never a wrong time to buy real estate if you do your diligence to buy it right. As winter approaches, keep your radar out for your next rental property and then take time to run through all the numbers to be sure they support your goals as an investor.
This article was written by the Rentometer Content Team. The Rentometer Blog features fresh takes and insights on rental housing topics, services, and technology.