While many in the news have been widely covering the rising cost of everyday items, they’ve been surprisingly quiet about the state of the real estate market lately. I suspect that’s because they’re concerned about causing a panic that could lead to a market crash. What I’m afraid they don’t realize is that we may already be well on our way to exactly that, and failing to address it only makes the problem worse.
My view on this issue isn’t just shaped by personal experiences or anecdotal evidence, although there is plenty from both to support it.
It’s based on empirical evidence, including foreclosure, sales volume, and price data, to name just a few examples. Additionally, inflation and interest rates are up dramatically, as well as personal, corporate, and national debt. We’re in a financial pressure cooker and it seems like most people don’t even realize it.
Experts say we’re facing a pending real estate crash that I believe will dwarf what we saw in 2008, and when it hits critical mass, the destruction will be swift and devastating.
This means that professionals in the real estate industry need to evolve in order to thrive not just this year, but well into the future. So in this article, I’m going to outline some of the things that some of the leading experts in the industry believe you need to do to overcome the new challenges facing in today’s real estate industry.
Redefine your idea of housing
We’ve watched as new homes have trended larger and larger over the last few decades, but now, with growing interest rates and mortgage rates climbing, tiny homes and ADUs (Accessory Dwelling Units) are becoming more popular than ever. As budgets continue to get stretched, affordability is quickly becoming the most significant factor in purchasing decisions today.
Cofounder of the 3D printed tiny home manufacturer Azure, Gene Eidelman, about this trend, and he says, “An increasing number of U.S. states are taking a favorable stand on ADUs on existing residential and multifamily properties. Likewise, the current interest rates are making these small units more affordable for individual buyers as well as for investors and developers.”
Eidelman notes that the inspection timeline is much faster and more efficient for factory-built housing units compared to traditional construction.
I agree with his perspective based on what I’ve seen over the last few years. Smaller properties seem to be moving a lot faster, while larger ones tend to sit on the market a lot longer. And as Dr. David Phelps pointed out in a recent article here, our economy simply does not work for a majority of Americans any longer and home affordability haas been absolutely shredded.
This is true for investors and ordinary home buyers alike. Now, I’m not saying you need to completely switch lanes, but I do believe it’s wise to expand beyond the status quo, because complacency kills—especially in a slow market. If you wait until you’re in a tight spot before you start evolving, it likely will be too late.
Don’t take this example as a one-size-fits all approach, though. Invest the time necessary to identify the trends in your markets, because what’s growing in one area may be declining in another. It’s critical that you make your decision based on data here, rather than hype or a gut feel.
Provide exponentially more value than your competitors
When the economy slows down and people start analyzing every penny they spend, price obviously becomes a factor in every buying decision, but an even bigger factor is value. People want to get more bang for their buck, so they’ll often look for vendors and products that may not necessarily be the cheapest, but do provide the most value in relation to the cost.
That’s where most people go wrong—they simply cut their prices, which may seem more attractive to some, but it also makes people perceive the brand as a lower value compared to more expensive options. Often this leads to people eliminating the product or service entirely instead of going with the cheaper one they can currently afford.
There are an infinite number of ways to provide more value in every industry, you just need to be creative and identify what really matters to your customers or clients.
Tatiana Zagorovski, managing partner of Trio Realty Partners, has created a powerful advantage by doing exactly this. While her company is focused on purchasing rundown starter homes, renovating, and then reselling them at fair prices while still earning a healthy profit, that’s not the most impressive aspect of her business model. The true power of her model is the funding options she offers. Her buyers are often lower income or starting over in life, and as a result, didn’t qualify for traditional funding.
“I know exactly what it’s like to have your life turned upside down and have to start over because I faced it when I had to start over in two separate countries before eventually immigrating to the U.S. for my third and final reset. When I got into real estate, I realized that a lot of people were in a similar situation, making them unable to purchase a home, so I rolled up my sleeves and went to work to find ways to change that for them,” she explained.
After a lot of work and a series of seemingly endless phone calls, Zagorovski—who often goes by “Miss Z” because of the difficulty many Americans have pronouncing her name, found several creative ways these buyers could get funding to purchase a home, and in doing so, provided something other real estate professionals weren’t willing to do. This made her services infinitely more valuable, and in addition to the added revenue it added directly to her bottom line, it also generated a slew of new referrals, adding even more revenue.
Leverage technology the right way
Personally, I’m not the most tech savvy person out there, but I rely heavily on it because I know the tremendous leverage it can provide. There are tons of ways to do this, such as using AI to quickly analyze large amounts of data, using automation to take boring and repetitive tasks out of human hands, and using CRMs to supercharge your marketing efforts, for just a few examples.
When used properly, this can be a game changing strategy that enables you to outperform significantly larger competitors, which are often slower to adopt new technology. But if you’re not a tech genius, it’s critical to find the right professionals to guide you or even handle it for you rather than trying to figure it out yourself. Speaking from first hand experience, that’s a recipe for disaster.
The key here is to use technology in a way that creates some kind of direct benefit to your business beyond marketing hype. It’s not enough to say you’re using AI. That may get your team excited, but if it doesn’t either save you time and money, or increase revenue, it’s meaningless.
REI Blackbook founder, Damon Remy, says, “Don’t let technology dictate your strategy—let your strategy dictate how you use technology. Start by automating one small piece of your process, then another. Before you know it, those small wins stack up, and you’ve built a system that works harder for you, not the other way around.”
Essentially, you want to look for ways to use technology to do what you already do, but faster, more precisely, and with greater efficiency. For example, AI and automation can be utilized to categorize and respond to leads far more effectively than a human ever could. This enables you to scale your business development activities. Another tactic is to leverage AI in underwriting to ensure a level of detail that would take even an experienced underwriter exponentially longer to achieve. This helps you to find truly great opportunities while avoiding the riskier ones.
Bottom line—there are countless ways to use technology to give yourself an advantage over competitors, but if you want to avoid simply creating additional costs, the tactics you chose must provide a significant benefit to your business.
Lean more heavily into marketing
When things start to slow down, it’s smart to identify ways to cut costs, but often, many make the wrong choices in where they make those cuts.
Lavish company parties, charitable donations, and vehicle upgrades are all examples of good targets for cuts, but things like marketing, tax strategy, and business process optimization would be some of the activities you probably should not cut because of the disproportionate positive impact they have in generating revenue or reducing costs.
For example, in a down market, opportunities tend to flow to the most well known and trusted professionals as buyers and investors seek to minimize risk, so it’s critical to stay top of mind with your market.
Jeremy Knauf, founder of the PR firm, Spartan Media, says “You need to stay in front of your prospects, partners, and investors to maintain name recognition, but it’s not just about the exposure. You also need to grow your authority through thought leadership—demonstrating your knowledge, capabilities, and unique insight. This shows the people what benefits you bring to the table that others can’t, and that creates a powerful advantage for you. Plus, if you double down while others are pulling back, it gives you an opportunity to capture more market share more quickly than when times are good.” Knauff recently launched Spartan Community, a private group for businesses on a smaller budget where he teaches a range of marketing strategies and tactics, and provides virtual mastermind sessions and a curated library of video content on a variety of marketing topics.
Increasing marketing efforts when things slow down is a strategy I’ve used consistently throughout my own career, and it’s helped me weather several recessions that completely wiped other investors out of the real estate market. It’s also worth noting that marketing and tech go hand in hand because when used properly, technology can amplify the impact of your marketing efforts, creating exponentially more results.
Approach recruiting from a holistic perspective
While it may sound counterintuitive, a market slowdown can actually be a great time to hire top tier talent you couldn’t otherwise find because of layoffs. And in many cases, the employees you’re looking for may still be working, but due to layoffs within their company, they’re being forced to shoulder an unreasonable workload and looking for a gentle landing somewhere new.
But you’re unlikely to find these candidates by simply posting on the job boards or social media. Top performers will often get snatched up before ever looking online because they’ll start discussing their plan with family, friends, and associates long before leaving their current employer, and will be hired within a matter of days or weeks.
Mark Dyson, host of the The Voice of Job Seekers podcast, says, “Trusted colleagues or peers are a great way to find top-tier employees, and this tactic often creates a long-tenured employee—far more than an applicant from a job board. The value of a built-in relationship embedded with trust from both parties creates buy-in from the team. Another place is an industry organization or association where the referred has collaborated on an industry project, committee, or workshop facilitated by a potential referral. These types of referrals have a reputation for providing value, connecting others to the best opportunities, and understanding market demands.”
This has been my experience as well, and when the economy slows down like we’re experiencing now, this becomes even more critical because people don’t have the time to wait around for the perfect job. In other words, the best employees are going to get snatched up pretty quickly, so you need the right approach if you want to hire them.
Play your cards right in this area of your business and you’ll have the opportunity to bring the kind of A-players onto your team that can put your business on an entirely new level.
