Is now the right time to start?

Question

HI, my name is Mark Barbee and I am new to investing. I started an LLC and have been pursuing house flipping full time for about a month or two. My wife's family keeps urging me to reconsider this move as it's a bad time to get into real estate and there is no money to be made anymore. Are they right? How do I respond? Any advice welcome, thank you.

Michael Plante · Answer

Yesterday was the best time to start today is the next best

tomorrow is the least best

Nathan Gesner · Answer

A flip requires knowledge of the market, experience accurately estimating cost of rehab, the ability to rehab and stay on budget and on time, and a stable/growing market that enables you to sell when the job is complete. Right now the market is on a downward swing, materials costs are high, the economy is weak, and you have little/no experience. I would say it's a terrible time to try flips.

Shiela R. · Answer

@Mark Barbee, hello and welcome to BP.  :)

Don't mean to sound negative, rather realistic - I agree with your in-laws in that it's not the right time to get started in a conventional way with residential REI.  Conventional meaning: find a property through the MLS, bring in 25%+ for a DP and a 30 yr fixed loan. There are so many ways to invest in REI, bear with me...

I whole heartedly disagree with the idea that "it is always the right time to get started in buying RE."  I've seen, first hand, people lose their shirts who were posing as "investors" who didn't buy at a discount, didn't know costs and timelines of improvements, didn't know how to manage contractors or tried to do the work themselves and didn't budget for holding costs. These same properties were picked up by experienced investors 18+ months later at a 20%+ discount. I saw a ton of this circa 2006-2010. It's too early to buy - even for LTH, IMHO as we're just coming off a peak market.

Now, if you know how to get creative, like @Doug Pretorius suggests with taking over existing financing (buying on terms) you might have some success.  Couple things - you must know your market. Period. Are you looking at properties?  Bringing clipboard with a checklist to estimate repairs?  How will you finance? If you aren't buying on terms you move forward with strict criteria. Meaning you don't buy anything that's not at a 20% discount - repairs - holding costs.

Finally, there are so many ways to invest in RE.  Flipping is just the most visible with HGTV, TLC, etc. Syndications both on the residential and commercial side offer some desirable terms with very hands off investments after your time on the initial research. That being said, it might be the best investment for you to invest in yourself.  Get some solid education specific to REI and then implement what you learn in the coming months.

Best of luck!

Jay Thomas · Answer

Hey Mark!Real estate will always be good investment because people will always need a place to live. I don't think you should leave real estate behind fully but maybe pivot your current stance. Instead of fix and flips look into buy and holds,  looks into different states, look into REITS but, do not walk away from real estate as a whole.

Devin James · Answer

Hey Mark Barbee,

If your family isn't in the business, then I wouldn't listen to them. Family & friends will always think it's a bad time to get into real estate.

Doug P. · Answer

@Mark Barbee This is probably not the best time for flips. You need to get a substantially lower price and rehab them fast and then be prepared to sit on them for awhile.

However flips are only one tiny niche. Right now is one of the greatest times in history to take over low rates sub2 for long-term holds or very nice spreads if selling on a wrap or lease option. It's also a good time to pick up long-term holds with bank financing. Get the price low enough so that it works even with the higher interest rates. If rates drop later you can always refinance.

Jared Hottle · Answer

The best time to plant a tree is today or 20 years ago. So I always think it is a good time to get into real estate investing. There is a competitive advantage or an angle to make money in all markets. That being said I think flipping right now is a little dangerous. Inventory remains low but rates going up has made people scared and able to afford less. If you are really wanting to flip I would say just make sure to go in with multiple exit strategies. Run the numbers as if a flip but also run them as a BRRR deal. As long as it will cash flow as a rental you will be alright. Then once you are done see where the market is, maybe list it but be ready to rent it if you do not get any traction.

Nicholas Coulter · Answer

@Mark Barbee I would take a look at a different strategy. Flips to me right now are risky to start as a new investor because there will be a lot to learn and there is much uncertainty in the market. I would instead leverage a strategy that you can buy and hold to make sure that you are able to withstand a potential dip in the market. Have you considered house hacking?

Joe Villeneuve · Answer

Well, you can't start yesterday.

Addam Driver · Answer

Hi Mark!

It's ALWAYS a good time to start.  If the numbers make sense in your favor, do it.  The numbers don't always tell the whole story, but they also don't lie.

I recommend you utilize the calculators on BP, partner with someone who's a little more experienced, ask questions in the forums, etc.  You got this.

Is now the right time to start?

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