Ready to buy, but should I wait?

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Ready to buy, but should I wait?

Maurice E. Stokes Jr
New to Real Estate · Washington, DC · Member since 2020 · 21 posts · 14 votes

Im in position to buy my first investment property. With the virus issues just starting to heat up Im now wondering am I starting out at the beginning of a bad time to enter the market? This will be my first Investment so this subject is only adding to my already beginner anxieties. Any professional advice on should I wait a bit to see if this gets worse and maybe run into better deals down the line or jump on the opportunities at my door step now? Im in the Baltimore Maryland region.

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
6y

@Maurice E. Stokes Jr

If it wasnt the virus, it would be the bombing in Iran. If it wasnt the bombing, it would be the oil war between Saudi Arabia and Russia. If it wasnt that, it would be something else.

There is always uncertainty in the market. Real estate is a long game. Times of fear drive rates lower. If everything was hunky doory like a couple months ago, youd be paying the same price but at a higher interest rate.

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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    6y

    I don't see much of a problem.  Just see if your Doctor can make a "house call". Make sure he/she checks the following:

    1 - Furnace makes a "coughing noise"

    2 - Temperature in the house seems to be "feverishly" higher than it should be

    3 - The furnace fan doesn't seem to be moving/replacing the inside air as well as it should so the house doesn't seem to be "breathing" like it should. 



    If any of the above problems exist, don't buy the property. It has the virus.



    8Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    6y

    @Maurice E. Stokes Jr

    If it wasnt the virus, it would be the bombing in Iran. If it wasnt the bombing, it would be the oil war between Saudi Arabia and Russia. If it wasnt that, it would be something else.

    There is always uncertainty in the market. Real estate is a long game. Times of fear drive rates lower. If everything was hunky doory like a couple months ago, youd be paying the same price but at a higher interest rate.

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group545 Reviews
    WebsiteView Page
    10Reply
  • Maurice E. Stokes Jr
    OP
    New to Real Estate · Washington, DC · Member since 2020 · 21 posts · 14 votes
    6y

    @Joe Villeneuve you lost me

    6Reply
  • Kyle DeutschmannPro Member
    Investor · Washington, DC · Member since 2017 · 428 posts · 205 votes
    6y

    Hey Maurice, 

    I wouldn't hesitate to hop on a good deal as long as it can cash flow well. Baltimore is known to be a cash flow market (i.e. most investors I know buy there for the cash flow not the appreciation) so if you plan on investing in Baltimore for cash flow it shouldn't matter too much what the price is as long as you're in the green after accounting for all potential expenses (including irregular expenses such as maintenance/repairs/vacancy).

    It's also a great time to buy in terms of interest rates being super low which will help improve cash flow as well. 

    Best of luck on your first investment property!

    [email protected]
    4Reply
  • Tim JacobPro Member
    Real Estate Agent · Baltimore, MD · Member since 2016 · 520 posts · 379 votes
    6y

    Hi Maurice,

    I don't think real estate is going to go down in value anywhere near what happened in 2008.  

    That being said if you are in it for the long game I would buy quality assets.  I did hear that Baltimore City suspended evictions due to the health crisis.  That will effect rental housing but more likely than not the low grade assets are the ones that will deal with that.

    If you need help analyzing properties and giving realistic averages of what the expenses will be over time I can help.    

    1Reply
  • Solomon Morris
    Rental Property Investor · MD · Member since 2018 · 287 posts · 205 votes
    6y

    @Maurice E. Stokes Jr have you ran the numbers? is it actually a deal? you will probably have unforeseen expenses that eat into your cash-flow at times.. you ready for this life or what? there will never be a perfect time

    2Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    6y

    Purchase the gems, sell the marginal performers, and pause and stay nimble on anything that's not a slam dunk.  The real estate market is not immune to the virus either.

    4Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    6y
    Originally posted by @Maurice E. Stokes Jr:

    @Joe Villeneuve you lost me

     If the house gets the symptoms (fever, coughing, trouble breathing), don't buy the house.  If it doesn't, then buy it if the numbers show a high cash flow.  Same as before the scare...and after.

    3Reply
  • Maurice E. Stokes Jr
    OP
    New to Real Estate · Washington, DC · Member since 2020 · 21 posts · 14 votes
    6y

    @Mike Dymski thanks, definitely directed towards my train of thought

    1Reply
  • Kiera Underwood
    Real Estate Agent · Oklahoma City, OK · Member since 2019 · 956 posts · 600 votes
    6y

    @Maurice E. Stokes Jr 

    Hey! Great question, and it’s perfectly normal to feel a little hesitant. My best advice would be if you're buying for cash flow to buy off of the current rate of return and not what could happen. For example, if the property will cash flow currently, and is in a lower tier rental rate, chances are that it will still cash flow the same no matter what the market in that area does. 

    The other thing is that even if the local real estate market in that area goes down, it likely won’t affect the prices on investment properties. It will affect owner-occupant homes, and especially higher-end/luxury properties, but even in a bad market, there are always investors looking to find good deals. With that said, it’s likely that the prices on investment properties won’t go down substantially even if the real estate market in that area does go down. Hope this helps!

    2Reply
  • Kiera Underwood
    Real Estate Agent · Oklahoma City, OK · Member since 2019 · 956 posts · 600 votes
    6y
    Originally posted by @Kyle Deutschmann:

    Hey Maurice, 

    I wouldn't hesitate to hop on a good deal as long as it can cash flow well. Baltimore is known to be a cash flow market (i.e. most investors I know buy there for the cash flow not the appreciation) so if you plan on investing in Baltimore for cash flow it shouldn't matter too much what the price is as long as you're in the green after accounting for all potential expenses (including irregular expenses such as maintenance/repairs/vacancy).

    It's also a great time to buy in terms of interest rates being super low which will help improve cash flow as well. 

    Best of luck on your first investment property!

     Well put! This is just a verbal vote haha. 

    0Reply
  • Anthony Rosa
    Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes
    6y

    Its a good question. Just make sure the numbers work and you put tenants that make a good income so whether they lose their job or this virus has an effect on them they can sustain and pay you on time.  My personal tip, rent to those on a fixed income (pension + SS) this way the rent always comes in no matter what downturn occurs.

    1Reply
  • Michael Belmore
    Rental Property Investor · MA · Member since 2020 · 98 posts · 77 votes
    6y

    Hi Maurice, 

    I really don't think anyone knows the answer to whats going to happen. 

    I think the answer depends on what the investment property will be. If its buy and hold you should be running your number on worst case scenarios anyways and have at least 3 exit strategies if things go sideways. 

    If its a flip maybe wait until things are not so volatile or increase your cash flow/purchase price standards to tip the scales in your favor for when rain comes. 

    If in your heart of hearts you believe something bad is going to happen maybe look into some properties/areas that didn't take a huge hit during 2008. I'm pretty sure storage units performed decent relativity speaking during the crash. Also, you are close to DC, the government kept paying their bills. 

    Good luck and congrats on getting yourself in position for your first investment property. 

    - Mike 

    1Reply
  • Account Closed
    Investor · United States · Member since 2018 · 565 posts · 356 votes
    6y
    Originally posted by @Maurice E. Stokes Jr:

    Im in position to buy my first investment property. With the virus issues just starting to heat up Im now wondering am I starting out at the beginning of a bad time to enter the market? This will be my first Investment so this subject is only adding to my already beginner anxieties. Any professional advice on should I wait a bit to see if this gets worse and maybe run into better deals down the line or jump on the opportunities at my door step now? Im in the Baltimore Maryland region.

     Hey man, if this continues for 2-3 months people are going to start losing properties. If you have access to off market deals you'll be able to get some for way below market once they foreclose. 

    4Reply
  • Justin Lanciault
    Realtor · Washington, DC · Member since 2018 · 166 posts · 88 votes
    6y
    Originally posted by @Michael Belmore:

    Hi Maurice, 

    I really don't think anyone knows the answer to whats going to happen. 

    I think the answer depends on what the investment property will be. If its buy and hold you should be running your number on worst case scenarios anyways and have at least 3 exit strategies if things go sideways. 

    If its a flip maybe wait until things are not so volatile or increase your cash flow/purchase price standards to tip the scales in your favor for when rain comes. 

    If in your heart of hearts you believe something bad is going to happen maybe look into some properties/areas that didn't take a huge hit during 2008. I'm pretty sure storage units performed decent relativity speaking during the crash. Also, you are close to DC, the government kept paying their bills. 

    Good luck and congrats on getting yourself in position for your first investment property. 

    - Mike 

    DC and Baltimore are two completely different markets. With that being said. If it’s a good deal, buy it before someone else does! 

    0Reply
  • Michael Belmore
    Rental Property Investor · MA · Member since 2020 · 98 posts · 77 votes
    6y

    @Justin Lanciault

    I know Justin, I used to be a realtor in Arlington. I meant in my post if he is really worried to look at DC as an investment area.

    0Reply
  • Babek Sandhar
    Member since 2017 · 62 posts · 60 votes
    6y

    @Maurice E. Stokes Jr it seems many people will hold a bias towards buying property. I’ll play devil advocate and say wait. Ask yourself a few questions.

    Is corona virus the real reason the feds pumped 2 trillion dollars into the repo market and lowered interest rates to 0? Yes covid is very serious, but no that printing had more to do with cracks in the system.

    After banking almost collapsed in 2008, was anything really fixed (I.e. let the bad banks fail like in Iceland), or did they continue going about it as if nothing was wrong in the first place?

    If the stock market made one of the highest jumps in a ten year period (roaring 1920s, dot com are the two others), does that mean it should be subject to the same severity of a crash as the two?

    Keep in mind market cycles boom and bust every 6-12 years. I’d be more skeptical looking at properties towards the end of these cycles unless getting cash a very stable market and good cash flows. I’ve made many posts on my opinion which is contrary to many people’s so perhaps it would give an alternative perspective on things. You can see the other posts I’ve made talking about main drivers of RE in major cities, issues in global markets, and a potential Great Depression II. Read those and feel free to PM me any other questions you have. I’m on the same boat, looking for a property but I’m waiting (I love in Bay Area which is immensely overpriced). Even when most people have told me I’m stupid, young and should take risks. I prefer calculated risks so I’ll continue to wait. My personal belief (just my opinion) is we’ll see a 30-60% correction in real estate in many bigger markets.

    I’ve invested in financial markets since 2010 (where all my wealth has come from) and majored in international macro economics so I’d say while I may not know as much about real estate as some folks, my bread and butter is financial/global markets. Stay safe my friend and make sure you have a plan if stuff hits the fan.

    3Reply
  • Account Closed
    Rental Property Investor · Dallas, TX · Member since 2020 · 20 posts · 29 votes
    6y

    @Babek Sandhar

    Appreciate your thoughts on this. I've posted in other threads, but I'm about to go through my first REI purchase and got to admit I've been strongly considering backing out. If I were in the market I live in (DFW), I'd be running away without question as housing as been ridiculous lately and I have to imagine this is going to impact more heavily in larger markets such as this.

    But since our investment property is in a near(ish) college town, my wife and I have ultimately decided to move forward.  The numbers make sense even with a slump in rent prices and barring a catastrophic occurrence like no college classes in the Fall, we think demand for a well-priced rental isn't going to dip enough in our target market.

    Would love to get your thoughts, even if you disagree.

    2Reply
  • Wendy PattonBusiness Member
    Real Estate Consultant · Clarkston, MI · Member since 2009 · 864 posts · 350 votes
    6y

    There is the most opportunity to get deals during a time of fear (and that is primarily what this is) - I don't want to get on a rant about this and the media, but to answer your question - if the deal is good YES buy now!  This is also a time when you can likely negotiate even more as people are going to be making decisions based on fear.   There is a dip right now and you need to jump if you can on a deal.   

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    2Reply
  • Casey Rolland
    Investor · Port Townsend, WA · Member since 2014 · 103 posts · 50 votes
    6y

    @Maurice E. Stokes Jr

    If I were you, I would only jump into my first investment property if I had 6 months operating cash, meaning if my property went vacant for 6 months, can I pay the mortgage without any rent coming in for 6 months? With the current virus situation, I am thinking of the worst case scenario for my hard earned money & credit protection for future purchases. 

    1Reply
  • Adam TafelBusiness Member
    Real Estate Agent · St. Paul, MN · Member since 2017 · 585 posts · 399 votes
    6y

    @Maurice E. Stokes Jr - this is the most frequent question I get: should I wait? Finding your first deal is a process, and most likely a long one. Have you found a good buy? Are you ready to make an offer? Honestly I'd give it a week if it were me - let's not minimize what is happening right now - this pandemic is a big deal. Will it dramatically effect housing prices? Maybe not, probably not, but... You've waited this long to buy a deal, I wouldn't jump into anything without considering the big picture. 

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    3Reply
  • Jason Taliaferro
    Real Estate Agent · Baltimore, MD · Member since 2014 · 113 posts · 71 votes
    6y

    @Russell Brazil
    @Maurice E. Stokes Jr
    I totally agree that real estate is a long game. However, some investments are shorter like flipping or rehabbing houses. Flipping is more seasonal for a variety of reasons. I think this season for flips may be wiped out. I hope I am wrong. The DC area to some extent will be buffered by the Federal government and some areas I imagine tech-heavy areas where many people can work remotely may fare better than other areas. I expect more inventory to bring down prices. Of course, no one has a crystal ball or an accurate one at least. One week ago this was barely a threat on most people's radar in the REI community now, everyone has an opinion (including me). People keep comparing this pandemic to other events such as 9/11, 1918 Spanish Flu, and 2008. Each of those events were different from each other and this pandemic is different also. One thing that is constant is in times of uncertainty it is better to have more liquid assets than over-leveraging yourself. Please have cash reserves for any new buy and hold.

    Secondly, don't let interest rates tempt you into a bad deal. Interest rates change and you can refinance. The only way to lower the principal on a loan is to pay it.

    1Reply
  • Account Closed
    San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
    6y

    I'd wait.  The market has been slowing down anyway.  I don't see prices going up while you wait, but most likely the opposite.

    0Reply
  • Rick Albert
    Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    6y

    It comes down to how long you plan on holding the property.  If you plan on owning it forever, then does it matter what you buy it for?  If the numbers work now, you should consider it.  This virus issue will pass and interest rates are at historic lows.  You wait and rates go up, that will hurt your bottom line.  If interest rates continue to drop, you can look into refinancing. I refinanced my condo twice in the first year of ownership.

    0Reply
  • Edgar Hernandez
    Rental Property Investor · New York, NY · Member since 2020 · 17 posts · 1 vote
    6y

    @Kyle Deutschmann

    Hi,

    I am a newbie first time investor. Found a property on the MLS for 65,000 SF 2 beds one bath . Needs about 80k in renovations. Arv is 180k-200k . With built in equity . Motivated seller. Rent in the area low end 1100 higher end 1200-1600

    It’s a D property on a B-C location In PIGTOWN. Taxes are $1175.

    I am thinking of pulling the trigger and offering $46,000. What are your thoughts during these current times. Should I proceed with the offer or wait it out and save my cash.

    If I do buy it I'm planning to use my business LOC for renovations or possibly getting a hard money loan.

    What are your thoughts ? Please help!

    0Reply
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