Can someone please explain the current market to me? When to buy?

22 Replies

Reading some books, and slowly starting to understand the market a little better.

However, I’m a little confused on what the housing market is today?

We want to wait for the “bubble to burst,” before we purchase properties, right? Because then the demand to sell will be a lot stronger for us to make better deals.

When is this time coming in America? It’s approaching soon, correct?

Buy when the numbers make sense.  Ben Benanke just said EZ money will continue.  No CRASH in sight with that policy.   Dont fight the FED said economic genius Fred Flintstone.

I tried fighting the FED-  I lost.

The status of the General Economic Market has an impact on the General Real Estate Market, but very little on the analysis of any given RE Micro-Market.  If you spent your time wondering/waiting on the GEM for the right moment to pounce, you will miss opportunities all over the place in the GREM.

A poor GEM just means the deals are harder to find in the GREM, but not impossible. It also means REI's must actually be good at analysis of RE Markets to find the RE Micro-markets ..which is true regardless of what the state GEM is in.

Keep this in mind, "The things that come to those who wait, are the things that are left behind, by those that get there first".

So learn how to analyze GREM's, and just get there first.

Warren Buffet is waiting.  Jeff Immelet bought all kinds of stuff at elavated pricing-many knew it.   Did it end well for GE?

Do you want to be Warren or Jeff?

Originally posted by @Joe Villeneuve :

The status of the General Economic Market has an impact on the General Real Estate Market, but very little on the analysis of any given RE Micro-Market.  If you spent your time wondering/waiting on the GEM for the right moment to pounce, you will miss opportunities all over the place in the GREM.

A poor GEM just means the deals are harder to find in the GREM, but not impossible. It also means REI's must actually be good at analysis of RE Markets to find the RE Micro-markets ..which is true regardless of what the state GEM is in.

Keep this in mind, "The things that come to those who wait, are the things that are left behind, by those that get there first".

So learn how to analyze GREM's, and just get there first.

Thanks for this post, Joe.   You're quote goes right in my notebook so I can see it frequently while I'm writing down notes on condo developments we're looking at in our market.  

Originally posted by @Nathan Asher Robson :

Reading some books, and slowly starting to understand the market a little better.

However, I’m a little confused on what the housing market is today?

We want to wait for the “bubble to burst,” before we purchase properties, right? Because then the demand to sell will be a lot stronger for us to make better deals.

When is this time coming in America? It’s approaching soon, correct?

The old rule of thumb is that you make money when you buy.  You could potentially make more money if you buy during a market downturn, but is that really worthwhile?  Only you can answer that for yourself.  

If a deal makes sense and is profitable at $100k, would waiting to see if you can get a similar deal at $90k make sense?  There are 2 ways to look at that.  One way is to be gung ho and say you make an extra $10k because you bypassed the $100k deal and waited for a market downturn.   Another way to look at it is that you lost all the profit on the $100k deal because you didn't do it and wasted 6/9/12/24 months waiting for a market downturn.

Originally posted by @Doug Pintarch :
Originally posted by @Joe Villeneuve:

The status of the General Economic Market has an impact on the General Real Estate Market, but very little on the analysis of any given RE Micro-Market.  If you spent your time wondering/waiting on the GEM for the right moment to pounce, you will miss opportunities all over the place in the GREM.

A poor GEM just means the deals are harder to find in the GREM, but not impossible. It also means REI's must actually be good at analysis of RE Markets to find the RE Micro-markets ..which is true regardless of what the state GEM is in.

Keep this in mind, "The things that come to those who wait, are the things that are left behind, by those that get there first".

So learn how to analyze GREM's, and just get there first.

Thanks for this post, Joe.   You're quote goes right in my notebook so I can see it frequently while I'm writing down notes on condo developments we're looking at in our market.  

 I've said that for many years...it's the tagline on the bottom of my emails, and will be my epitaph on my gravestone too.

Originally posted by @Joe Villeneuve :
Originally posted by @Doug Pintarch:
Originally posted by @Joe Villeneuve:

The status of the General Economic Market has an impact on the General Real Estate Market, but very little on the analysis of any given RE Micro-Market.  If you spent your time wondering/waiting on the GEM for the right moment to pounce, you will miss opportunities all over the place in the GREM.

A poor GEM just means the deals are harder to find in the GREM, but not impossible. It also means REI's must actually be good at analysis of RE Markets to find the RE Micro-markets ..which is true regardless of what the state GEM is in.

Keep this in mind, "The things that come to those who wait, are the things that are left behind, by those that get there first".

So learn how to analyze GREM's, and just get there first.

Thanks for this post, Joe.   You're quote goes right in my notebook so I can see it frequently while I'm writing down notes on condo developments we're looking at in our market.  

 I've said that for many years...it's the tagline on the bottom of my emails, and will be my epitaph on my gravestone too.

First time I've seen it...will not be the last time I've read it!     Good mantra.

Focus on the 'How' not the 'When'.  And focus on your 'Decisions' not your 'Conditions' to drive your financial future.  To provide perspective, we have been answering the same question every week on these forums for five years.  We have to be very careful right now but prudence is a lot different than inaction.  Good locations, cash flow, value add, prudent debt, reserves.

Condo developments?  Thats going backwards.  New developments charge Premium just because they are new and shiny.

A good deal is a good deal regardless of what the market is doing. You are interested in good deals, not waiting for the market to crash. It cuts both ways, too. A down market will suppress rents and increase vacancies. 

Originally posted by @Jan Brady:

Condo developments?  Thats going backwards.  New developments charge Premium just because they are new and shiny.

These are established developments near the beaches, Jan, we're looking at several for our next STR there. We have one now and it's doing quite well. I dive into HOA financials, owner-occupied vs transient owners, rentals, pool maintenance, major road access, everything. So when one comes up for sale we know where we're looking.

Buy when the numbers make sense for whatever your plan is. Even if the real estate “bubble” pops it might not change anything in your area. National vs local can be very different.

I don’t foresee a real estate market decline, I don’t think that values will continue to rise as rapidly as they currently are but I also don’t see a decline in the near future. Just my two pennies.

1. No one knows what the market will do. You also don't need to time the market and predict the future to make money.  You find your edge and you play the edge and you make money.  A Casino does not predict the future, they know their edge and they know if they keep playing it they will make money over time.

2. You need to have your education so you know exactly how to buy correctly.  If the market crashes but you don't know what to do you ain't making money anyways.  Most people think "I just have to time the market buy at the bottom and sell at the top and I am rich"  They watch the "Big Short" and think they will do that and that's how you score.   LOL

3. You need to have money and reserves and understand risk and leverage.  The key point is if you don't you will lose money over time.  Anyone can get lucky but luck only goes so far before skills matter.  Dumb luck makes the unskilled think they know what they are doing.

4. In real estate, you make money buying while it's going up, down, and sideways.  If the market crashes 30% and values drop.  I'm cool with it.  Whatever.  If it keeps going up, I'm cool with it whatever.   I know my risk.  If it does drop I will buy more, but I am not going to sit here and wait for something I have no idea when it will happen.  Could be next year could be 5yrs from now no one knows.  

If you don't understand risk and know what you are doing.  It is certainly riskier today than say 8yrs ago from the crash.  Higher prices more debt = More Risk.

Honestly, if an investor can't analyze and decide what to buy and when to buy they should not be investing at all.  Lesson here. 

@Nathan Asher Robson

Here’s how I look at it.

I buy a property for $40k. It rents at $800 per month. Get a loan on most of the balance, minus down payment percentage. Taking all cash flow and paying it off takes 6 years or so. I then own it free and clear. It will generate cash flow for the next 100 years. So what if the economy slows and the value goes to $10k for a while? I’m buying cash flow, for the long term.

It took me maybe $10k down to get it. And, probably will appreciate back up over time. Depends on your goals of course. But that fits mine. If the price does go down to $10k I’ll be buying tons of properties at that time to add to my portfolio. That’s a very simplified version of the plan and why I’m not concerned about price as much. Obviously I’m not paying $200k to get $800 in rent. If your play is for appreciation that’s different.

@Nathan Asher Robson the best time to buy is 20 years ago. The second best time to buy is now. Recession is coming, but that doesn’t mean the market will tank on a national level. That’s only happened twice in the last 80 years. 1933 and 2010. How likely do you think it is that it’s gonna happen again within the same decade? @Russell Brazil

I buy stuff with low debt load, high price to rent ratios and 10 percent under market value (with no rehab needed). You do this or value add deals and you can do well in any market

@Nathan Asher Robson

I don’t think anyone can time the real estate market. I’m a newbie but I’d say that your property/investment analysis should factor in market conditions and you mitigate your risk the best you can. Meaning you can find a deal in any market as long as you do your due diligence. I would also say that buy and hold investors (rentals) are impacted less in a down turn than people who flip. Generally speaking your mortgage payments on rentals are fixed and won’t change no matter what the market does. And people who rent from you are just as likely to rent in a downturn.

I have read that historically the overall real estate market goes through 16 year cycles. Things crashed around 2008 so using that metric there’s another 5 years plus or minus before another downturn. How accurate is this? Who knows.

Real estate markets can be very localized so this may not apply in your market. I know that my home lost $60k in value between 2006 and 2008. I recently got an appraisal and it is worth about $5k more than what I bought it for. So if it was over valued in 2006 then maybe at this point the market is where it should be.

All Real Estate is local.

Bad deals are made in good times.

A little bird told me this.

Like @Frank Wong says i'd learn to study markets with good economic indicators. Start with your backyard. What are you seeing, what do you like, what are you seeing? Benchmark then use it towards other market studies. I'd just not let it paralyze you to wait when everything is perfect because that could be never. There is always opportunities!

Listen lightly when someone tells you doomsday is coming, don't buy.

@Bjorik Mutize The market is not something that could be read. It is an unknown and is set by what people do and because you cannot predict what people do you should only make decisions based off the numbers that you know and that are real. The other thing is TRUMP because his decisions influence what people do there is no exact answer it goes by your market and what you can obtain from it. If you’re investing in a property and And you are able to get 10% return on your money from the property, then obviously it doesn’t matter what the market says or does.

Focus on studying deals not studying the markets . If we listened to the “ experts” we would have already been in another recession 4-5 years ago . Look Everyday in your town there are people who are getting wealthy doing deals and when the market eventually does have a correction there will still be people in your town making good money getting deals . Good investors make money either way

Originally posted by @Mike Dymski :

Focus on the 'How' not the 'When'.  And focus on your 'Decisions' not your 'Conditions' to drive your financial future.  To provide perspective, we have been answering the same question every week on these forums for five years.  We have to be very careful right now but prudence is a lot different than inaction.  Good locations, cash flow, value add, prudent debt, reserves.

quality locations while they may not look best on paper usually out perform others in times of stress.

One thing I think most of the " waiting for the bubble to burst crowd"s  fails to understand that if you do have a major correction the capital markets can correct right along with them .. so while credit is relatively easy right now for mom and pop get into buying a few rentals folks.. this may not be the case.. Those with cash can disregard this statement though :) 

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