Summary: <br> <br> <br> <br> What’s the difference between a linear real estate market and a cyclical market? Is one better than the other? Today we explore the different market types and what they mean to you as a real estate investor.<br> <br> We also take a quick look at a turnkey property available in one of our linear markets with great cash-flow and high rates of return.<br> <br> We also take a look at a real world example available today from www.NoradaRealEstate.com.<br> <br> - - - - - - -<br> <br> Subscribe on iTunes and Stitcher so you don’t miss an episode!<br> <br> Please remember to RATE and REVIEW our show to help us reach new listeners.<br> <br> Get your FREE copy of The Ultimate Guide to Passive Real Estate Investing.<br> <br> <br> Understanding Linear and Cyclical Markets<br> Welcome back to another episode of Passive Real Estate Investing. I'm your host, Marco Santarelli. This is the show where busy people like you learn how to build substantial passive income while creating wealth for the long term. Thanks for joining us. If this is your first time here, welcome. If not, we're glad to have you back.<br> <br> Today's show is about something that I talk about on a very regular basis. Something that most people understand conceptually but a lot of people still don't completely understand. This is really important if you're a real estate investor, especially when you're in the early stages of selecting what markets to invest in. This is the concept of linear and cyclical real estate markets.<br> <br> <br> <br> Cyclical markets are real estate markets that tend to have larger price moves up and down over the years. Property values will move up and down like a roller coaster and they have noticeable peaks and troughs. They are essentially the shooting stars of the housing market. These are the markets that have the booms and busts. The length of the cycle can vary from market to market because, as you know, all real estate is local. That's the saying in real estate. These cycles can last from seven to ten years from end to end. Many of these cyclical markets are found along the east and west coast of the United States where the household incomes are higher and land for new construction is in short supply.<br> <br> Good examples would be coastal markets along the coast of California, New York, New Jersey, as well as many parts of Florida, from Miami on up north. When conditions are ripe and the annual housing price gains in these areas go up, you can see 20 to as much as 30% or more in property values in a single year. These are crazy rates of appreciation and they are absolutely not sustainable.<br> <br> You may remember back in 2005, 2006, we've seen appreciation rates in southwest Florida, in the areas like Lee County go up 32 to 40% in a single year. There were two years back to back where they had large double digit returns. We all know what happened. Years later, that market became one of the ground zeros of the foreclosure crisis. Las Vegas, Phoenix, Riverside, California, southwest Florida, these were areas that had some of the largest number of foreclosures.<br> <br> We saw property values increase dramatically and then come crashing down. These local booms burn themselves out by pushing prices to unaffordable levels. When those prices get to those unaffordable levels, very few, if any, people can afford to buy the median priced home. At that point, what happens is buyers dry up, there's an excess amount of supply and that equilibrium no longer exists. The pendulum swings from one end to the other and property values come crashing down since there's no one to buy these properties because of the lack of demand. You get a galette of inventory.<br> <br> I often refer to these markets as bubble markets because they appreciate in value so dramatically in a relatively short period of time but they come crashing down ...
