Delaying Investment Until Next Economic Downturn

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Delaying Investment Until Next Economic Downturn

Pope Lake
Investor · New York City, NY · Member since 2019 · 82 posts · 43 votes

Hi BP! 

I'm currently looking to purchase a property in Birmingham, AL to buy and hold. I know that this market is currently great for this strategy, and hope to find a property that adequately cash flows. Ideally, I would like to purchase in this market before the year closes out.

However, given recent investor fear about an impending economic downturn, should I hold out until prices are generally lower? Of course, if I wait until the market actually turns I should be able to buy property for cheaper and save money.

While I've read that it's never great to try and "time the market" I also don't want to be over eager and purchase at potentially the wrong time, when waiting perhaps a little bit longer could result in a better investment. Interested to know your thoughts!

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Ladè Baruwa
Rental Property Investor · New York City · Member since 2019 · 90 posts · 122 votes
7y

@Pope Lake If you decide to wait until the market turns, who is to say when that will be? 

You may miss out on many opportunities waiting for an economic downturn, and who’s to say when it does happen that you will be in the same situation to buy as you are now?

Don’t wait. Do your homework, find an opportunity and go for it. 

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  • Jason Wollbrink
    Member since 2019 · 2 posts · 9 votes
    7y

    My thoughts are take advantage of today.  Eliminate the scarcety mindset of fear and act.  That being said, find a great deal below market and maybe don't over estimate your appreciation.  Personally i invest for cash flow so I am making (and saving more for the next investment) monthly.

    6Reply
  • Ladè Baruwa
    Rental Property Investor · New York City · Member since 2019 · 90 posts · 122 votes
    7y

    @Pope Lake If you decide to wait until the market turns, who is to say when that will be? 

    You may miss out on many opportunities waiting for an economic downturn, and who’s to say when it does happen that you will be in the same situation to buy as you are now?

    Don’t wait. Do your homework, find an opportunity and go for it. 

    19Reply
  • Bailey Masters
    Oxford, AL · Member since 2019 · 7 posts · 5 votes
    7y

    I am from Oxford, Al which is about an hour east of Birmingham. It's a great time to get in if you can find the right deals in the right areas! Im actually just getting in and looming to make my first deal! (Trying to decide between SFH and Multifamily.) anyway, i would love to connect and maybe find a deal, I can help you with the areas you want to be in and growth and appreciation is happening.

    5Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y

    Does the market you are looking typically have price drops during recessions? (The national housing market does not)

    And if it does, why would you want to buy into that market anyways?

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    7Reply
  • Billy Linn
    Investor · Green River, WY · Member since 2017 · 122 posts · 59 votes
    7y

    @Pope Lake it could be a really long time before prices go down again, if that’s the case waiting will cause you to not be in the game.

    The Fed could just print more money and make what your holding in cash be worth less while assets prices go up.

    I think the better question is how will you prepare to weather an economic downturn? Be smart about what you buy. Make sure you can be competitive if the demand for rentals decreases.

    8Reply
  • Dan K.
    Rental Property Investor · Boston, MA · Member since 2012 · 257 posts · 139 votes
    7y
    Originally posted by @Pope Lake:

    While I've read that it's never great to try and "time the market" ...

    Timing the market is impossible, that's why the property needs to have solid numbers. If you are looking for a buy and hold, being underwater shouldn't even matter in most respects so long as your rents are covering your expenses plus a profit. 

    Market rallies don't die of old age. 

    The key is to stick to your analysis. Don't start assuming vacancy rates will be zero or that appreciation will be 5% higher than average just because that's what it's been over the last 18 months. Additionally, in your analysis make sure the property is cashflow positive with money in your pocket.

    2Reply
  • John Patton
    Investor · Birmingham, AL · Member since 2016 · 315 posts · 206 votes
    7y

    I bought my first sh house in 2007 right before it crashed with 20% DP with lite rehab of paint and cleaning and come out with 11 % ROI and 225 gRoss monthly profits. Best thing I ever did because of the learning experience. I also got a second of line of credit on my primary residence. When the recession hit in 08 and 09 I was ready with my knowledge and my money from the line of credit at 4.5 % rate to pick up 2 more at 1/2 the price.

    Knowledge and access to money when everyone doesn’t is a great opportunity. 

    Good luck. Jp

    14Reply
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    7y

    @Pope Lake with that mentality I would recommend doing nothing for 25 years just to be safe.

    16Reply
  • Bill Plymouth
    Real Estate Agent · Philadelphia, PA · Member since 2018 · 416 posts · 396 votes
    7y

    @Pope Lake fun fact: 

    In 3 out of 5 of the last recessions, housing prices were barely impacted. Recession does not always equal housing crisis.  Give this post a read.  


    https://www.biggerpockets.com/...

    2Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y

    What’s a recession? Never heard of it before .We are investors ....We create our own economy and our own prosperity through actions we control . What’s the market going to do for me ? I choose not to participate in such trivial matters .

    6Reply
  • Kyle Shankin
    Rental Property Investor · Oakland County · Member since 2018 · 151 posts · 97 votes
    7y

    Hi @Pope Lake. You've already alluded to this, but focusing on predicting the future is probably going to cause more grief than profit. If the numbers make sense for your strategy, then it's a good deal. With a buy and hold, it theoretically shouldn't matter if you buy a property which then gets put underwater (LTV-wise, not literally). So long as the property is cash-flowing, you've still got a good investment and would just continue to hold until the market rebounds.

    2Reply
  • Jake Zhang
    Rental Property Investor · New York, NY · Member since 2019 · 11 posts · 25 votes
    7y

    Best time to buy was 20 years ago, second best time was today. Stick to you analysis and understand forced appreciation. Build enough cushion so that even if you do go underwater, your reserves or cash flow allows you to weather the storm. 

    10Reply
  • Account Closed
    Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes
    7y

    @Pope Lake the south doesn’t typically have the large swings in prices like we experience on the coasts. The wait may not be worth it.

    3Reply
  • Account Closed
    Member since 2019 · 1k+ posts · 1k+ votes
    7y

    @Pope Lake

    I saw T Swift alone at a bar once. Was gonna chat her up but figured I’d hold off until her next breakup song was released... look how that turned out for me (& her?).

    2Reply
  • Account Closed
    Member since 2019 · 1k+ posts · 1k+ votes
    7y

    @Pope Lake

    I saw T Swift alone at a bar once. Was gonna chat her up but figured I’d hold off until her next breakup song was released... look how that turned out for me (& her?).

    0Reply
  • Pope Lake
    OP
    Investor · New York City, NY · Member since 2019 · 82 posts · 43 votes
    7y

    @Bailey Masters Bailey thanks for reaching out, will be great to connect and discuss the area / market !

    0Reply
  • Pope Lake
    OP
    Investor · New York City, NY · Member since 2019 · 82 posts · 43 votes
    7y

    @Russell Brazil thanks for your feedback back! Makes a lot of sense to analyze the particular market itself before diving in. Good point about the national market. Other than discussing with your property manager, agent (members of your local “team”) and looking at stats like job growth, is there any advice you can share on how to best understand the market? Thank you

    0Reply
  • Pope Lake
    OP
    Investor · New York City, NY · Member since 2019 · 82 posts · 43 votes
    7y

    @Caleb Heimsoth hahah I like this a lot, puts things into perspective. Good point Caleb

    1Reply
  • Brendon Penner
    Rental Property Investor · Raleigh, NC · Member since 2019 · 17 posts · 4 votes
    7y

    @Pope Lake

    If you listened to any podcasts in 2015 they talked about a hot market and the recession looming. Here we are in 2019 and the same conversation exists.

    Analyze properties, find something that fits your numbers and take a leap of faith. Yes if this is the top of the market and you keep buying in the future you will average out your returns over time.

    If mls deals are overpriced (which seems like a lot are), drive for dollars and call some owners and ask them if they want to sell.

    My theory is you need to buy the first one to buy the second.

    Run the numbers, move forward and make a move. If the numbers don’t work, find another house to run the numbers on.

    Rinse and repeat.

    Happy Hunting!!

    1Reply
  • Pope Lake
    OP
    Investor · New York City, NY · Member since 2019 · 82 posts · 43 votes
    7y

    @Bill Plymouth interesting stat Bill. I’ll be sure to check out this article

    0Reply
  • Pope Lake
    OP
    Investor · New York City, NY · Member since 2019 · 82 posts · 43 votes
    7y

    @Kyle Shankin agreed. And cash-flow is my main focus anyway. Thanks for your comments Kyle

    1Reply
  • Pope Lake
    OP
    Investor · New York City, NY · Member since 2019 · 82 posts · 43 votes
    7y

    @Kris H. Good point Chris! (Ik T Swift is the one who’s worse off :) )

    0Reply
  • Jaron Smith
    Amherst, OH · Member since 2017 · 43 posts · 9 votes
    7y

    @Pope Lake go for it, dude!

    1Reply
  • Pope Lake
    OP
    Investor · New York City, NY · Member since 2019 · 82 posts · 43 votes
    7y

    @Brendon Penner thanks Brendon!

    0Reply
  • Jasmine H.
    Rental Property Investor · Houston, TX · Member since 2014 · 139 posts · 140 votes
    7y

    @Pope Lake I'm thinking of waiting one to two years. If the house prices go down, it'll be awesome. If they don't, at least I'll be able to save more and possibly buy two. I'm an advocate of buy low, sell high.

    4Reply
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