Hello everyone, this is my first post here.
Sorry for any grammar mistakes, English is not my native language :)
After 2 years of learning everything I can about investing, I decided that I want to invest in real estate. I made that decision six months ago, and I already knew then that I can’t buy a deal on my own. Therefore, my first goal was to convince my father that we should buy an investment property. It took me 6 months, but I succeeded.
The problem is that after doing some research, investing in real estate in my market (Israel) doesn’t seem to be a very good idea, for the following reasons:
1.Houses have doubled in price in the last 7 years, and prices keep going up. I’m afraid that it’s not a good time to buy real estate, and many people think that there is a real estate bubble here.
2.We can invest up to 50K, and mortgages are limited to 50%. Because of that, we are limited to 100K houses. There are no more than 70 houses in total for sale within that price range - so I don’t have many options about choosing my investment city / neighborhood. (these houses can be found in 2 neighborhoods in 2 different cities)
3.Rents are very low. Most of these houses will rent for less than 500$/month. After mortgage and insurance payments, we’re not left with much – not including vacancy, repairs, etc. Investing 50K for monthly cash flow of 100-150$ isn’t a very good idea in my opinion.
I once heard that the best time to buy real estate is right now. The problem is that the numbers just don’t make any sense.
On one hand, I know the importance of taking action, and after hearing so many successful people say that – it just has to be true. But on the other hand, I just can’t see how buying property in today’s market is a good idea.
I don’t want to find myself say in 5 years: “I wish I bought a property 5 years ago!”
but I also don’t want to find myself say: “It was the worse timing ever to buy my first deal”.
What would you do? What do you think I need to do?
(And sorry for the long post :) )
Welcome to the BP family. Best of luck on your new adventure.
Glad to have you with us.
Taking action is the hardest part, but too many people push just that. Yes, it is the first step, but it still needs to be a calculated one. You do sound like you've been doing your research so that is in line. Since I don't have any knowledge of the Israel market, could you give some details on what things are indicating a "Bubble" there right now. Your concern for buying at the top is valid and shouldn't be taken lightly. Especially since you aren't coming into it with large amounts of capital.
Thank you for your comment! Another sign for a bubble can be in the price to rent ratio: While prices went up more than 100%, the average rent increased by only 35%.
Many people said in 2011 that prices will go down soon - but they didn't. The same happened in 2013 and 2014, but once again - prices didn't go down.
If I decide to invest now I won't have many neighborhoods to invest in and my returns will be low, but im afraid that if I keep waiting and prices will keep going up I won't even have that option.
I just can't predict if prices will go up or down soon.
Well the market always goes in cycles. To what level and exactly when no one can predict, but from what numbers you are talking about in your original post it seems that buy and hold may not be too friendly to you right now. Appreciation investing is always a possibility, but I don't like to recommend that just due to unpredictability. Just as a scenario, let's say you had more capital to start investing with... How do the numbers work out in the more expensive properties? Are they still pretty mediocre returns?
Hello Mr. Cohen,
Congratulations on persuading your father of a great investment opportunity. What may be best for you to do is familiarize yourself with other markets, and find ways to leverage your funds (possibly through obtaining loans and procuring a portfolio of reasonable properties versus just one). Though the cash flow may seem low at first if you find more than one property the accumulation of cash flow may be worth it (once piled up). I think you have options and something can work for you, you just have to have the mindset to make it work: think HOW can this be done, versus saying it CAN'T be done, and you'll find a successful avenue I'm sure. Continue to learn, continue to read, check out some success stories and innovative investing to hear about optimistic investments as well as unusual solutions. Those forums may lead you to exactly what should be done. Happy learning and the best of hope to you and your real estate investing!!!
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