Invest Now or Wait For Potential Crash

88 Replies

Hi!

I’m new to the investing world. I want to buy a multifamily and house hack it. Would it be wise to invest now, while my market (Providence, RI) is super hot or wait for a potential crash? Any advice is greatly appreciated!

@Kelsey Mortimore I’m doing a mixture of both, trying to keep some cash in reserve but also staying active and still doing some deals here and there to keep some money at work and especially keep a pulse on what’s happening in the market.

For your first investment though, I believe the best time to start is “now”, at any point in the market cycle, simply because you have to live somewhere and there is a lot of virtue in just getting started and getting over the “first deal” hump, overcoming “analysis paralysis” etc.

I’d recommend taking some time to “digest” your first deal though and acclimate to all the joys and responsibilities of house ownership, before rushing on to the next one. I’d say that at any point in the market cycle but with a little more emphasis now as we may see the market change while you’re settling in on your first purchase.

“Waiting for a potential crash” is more of an intermediate/advanced strategy and... to be honest even most of the “experts” get it wrong as far as timing. (Being human, I’m just as likely to be wrong on predictions and timing as most other people of course.)

So I think you should definitely just focus on what’s best for your own situation and “get a piece on the board” with a house hack if the numbers are acceptable to you, and then reevaluate where the market is, and you are, after that.

Figure out what numbers work for you. If you aren't finding any deals that meet your goals you should wait for one that makes sense (that doesn't necessarily mean waiting for a downtown - just keep looking for that good deal where the numbers are what you're looking for). 



@Kelsey Mortimore  

I'll leave you with this quote I've heard from many experienced investors...

"The best time to invest was yesterday."

If it's a good deal, move forward. If you're house hacking you're going to be there for a couple of years anyways, so what's going on today is arguably not as important. Don't talk yourself into waiting on the sidelines for the "crash" that may never come. That's how you miss opportunities. Always be looking... the definition of "luck" is when opportunity and preparation cross paths. If you're never looking for opportunity and standing on the sidelines waiting for a crash, you won't be prepared to "get lucky" and make your success happen when it comes knocking. 

Here is part of a note I received not long ago from a Financial Advisor (although I never heard of the credentials until now):

"The collapse in the market is imminent, and has been for a while. This has been predicted by many, many "experts" in the field for some time (I believe we might be on our 3rd or 4th decade...I lost track). I'm not sure about the cash flow situation since I haven't researched that part of it yet, but all the signs are pointing to a major collapse soon,...very soon (there's an echo in here.  I have been hearing that da^^^ed echo for a long, long time).  Beware.  Soon, the sky will be falling."

Yours in Fear and Lack of Analysis,

Chicken Little, B.S.N.B.S.

@Kelsey Mortimore agree with everyone in this thread. If the numbers work buy it. Real estate is a long term investment. If you need the market to go up in the next couple months or year to make the deal worth it it was a bad deal anyway. If you can cash flow that's your protection from the market.

Don’t wait to buy real estate buy real estate and wait.

@Kelsey Mortimore I personally think there is going to be a crash. I'm selling my house to capitalize on the Sellers market. I'm planning to wait for the market to change before purchasing another place. I'm just giving my opinion of what I think will happen. I live in the D C. area where in some cases buyers are offering 15k to 50k over asking price, so with that going on, how can people not be under water in these homes? I'm new to this part of REI, although I have 3 rentals. So currently I'm trying to learn about these changing markets. Best of luck to you. There are some very smart investors in this group, so along with you, I'm excited to see what they will have to say.😊

@Kelsey Mortimore

Hey I hope you flourish.

I'm a day trader soon to trade for professional firms, and we often have to think if price will continue or "correct" much like this crash your anticipating. I deal with this feeling you have every single day, every trade. But every pro trader knows that the best time is ‘now'. Don't anticipate because it may never come. The crash has begun with this pandemic, this should be good enough in my opinion. Interest rates are extremely low. The sooner the jump the better. Anticipation is gambling and hoping for a market correction. Good luck.

Most people who wait now will end up waiting another 20 years or the rest of their life.

choosing not to do a deal now has more to do with conscious or subconscious fears than it does wisdom or strategy.

@Joe Villeneuve That quote is excellent, I'll remember that one. 

@Kelsey Mortimore As many others have said it's entirely dependent on the deal, your goals and your personal financial situation. If you're investing for the long term, have a reasonable amount of capital on hand, a strong savings rate and buy a deal where the numbers make sense then what's the downside? The market could very well drop but you'd still be living for free which (assuming you currently pay rent) is a huge upside. 

If you do nothing you'll continue paying for your housing, build no equity and continue wanting to get started. If you do your research/due diligence and invest wisely you end increasing your savings rate while beginning to pay down the loan and get your feet wet in RE investing.

Dan

I agree with many of the other comments here. The best time is always "Now", especially in regards to pulling the trigger on you first deal. Getting the first hand experience as a homeowner and landlord will be far more valuable than the deal itself. Will the market "crash" in 6 months? 12? 18? 24? Maybe it will. The truth is, no one really knows. Just like we didn't know the world would shut down 7 months ago, and be changed forever. However, if you're currently paying rent somewhere, and building someone else's wealth, and you want to purchase Real Estate as a long term investment strategy through rental properties, then why would you wait? Despite the heat of the market right now, if you find a property that makes sense, to which you can offset your living expenses, and have cash flow later as an occupied rental, the answer seems obvious to me! :) Good luck and happy Investing to you!

all the sayings like "best time is now" or "best time was yesterday", are good for normal time, remember we are in a situation(pandemic) that happens once in 100 years also it's global not only 1 or two countries.

I personally won't touch any thing until Jan 2022.

in Bayonne , NJ every house is going 20-30k above asked price.

we will start seeing real impact when all the stimulus money is gone, forbearance period is over. also you know how much debt USA has , around $82k per citizen.

so many years fed has been decreasing interest rate...it's almost zero now...what will be next??

Property price kept increasing for the last 10 years, but income it's same or less.

Seems like bigger bubble than 2007 to me.

Raj-Realtor Agent Bayonne, NJ

@Raj G. I have to respectfully disagree.  If there is an actual deal to pull the trigger on, why would you wait? Lets say someone is paying rent at $1800 / mo (about the average here in Rhode Island).  And they want to "wait a year" because they are afraid of a market crash.  In that year period they would've spent $21,600 on rent.  That could've been used as a sizable down payment, or to fund some rehab work on their purchase.  Not to mention, with getting locked in at an interest rate sub 3% right now, the money is practically free. If the market does soften a bit, I can't help but to think that the interest rates are going to have to increase at least a significant amount in comparison to where they are now.  So it's relative. 

A lot of unique perspectives to this topic though, very interesting to hear everyones input.  

@Matt Romano , yes, I agree with you on that and other special scenario(s) , my reply is more for generic situation for investor.

But it's very tough to find a good deal in today's scenario, until you are very lucky.

@Raj G. Absolutely! It’s definitely tougher to find a good deal in this market. It’s always wise to be cautious, though. I’m a conservative investor, and encourage any new investor to be as well. Now is NOT the time to be fudging the numbers. But, if it makes sense, then it makes dollars ;) 

There is concern around market volatility, but cash flowing assets are the safest play in town right now.  Always be investing AND there's only a certain period of time in your life where house-hacking makes "lifestyle sense".  If you can work that in, the time frame is short, but the wealth building factor is immense.  It's something I wish I would have done.  Live for free and invest the rest.  

Originally posted by @Kimberly Troy :

@Kelsey Mortimore I personally think there is going to be a crash. I'm selling my house to capitalize on the Sellers market. I'm planning to wait for the market to change before purchasing another place. I'm just giving my opinion of what I think will happen. I live in the D C. area where in some cases buyers are offering 15k to 50k over asking price, so with that going on, how can people not be under water in these homes? I'm new to this part of REI, although I have 3 rentals. So currently I'm trying to learn about these changing markets. Best of luck to you. There are some very smart investors in this group, so along with you, I'm excited to see what they will have to say.😊

keep in mind just becasue they are underwater does not mean they cant make thier mortgage payment and will simply ride it out.. and if they are underwater.. short sales take forever .. interest rates are so low even if they pay more the owner occ in many cases is less than rent.. so why would they sell only to rent for higher dollars ??? just another thought

 

Originally posted by @Matt Romano :

@Raj G. I have to respectfully disagree.  If there is an actual deal to pull the trigger on, why would you wait? Lets say someone is paying rent at $1800 / mo (about the average here in Rhode Island).  And they want to "wait a year" because they are afraid of a market crash.  In that year period they would've spent $21,600 on rent.  That could've been used as a sizable down payment, or to fund some rehab work on their purchase.  Not to mention, with getting locked in at an interest rate sub 3% right now, the money is practically free. If the market does soften a bit, I can't help but to think that the interest rates are going to have to increase at least a significant amount in comparison to where they are now.  So it's relative. 

A lot of unique perspectives to this topic though, very interesting to hear everyones input. 

I think what folks really dont understand is that if there is some bubble burst or Crash.. Credit will crash with it.. first to go is Investor mortgages.. So unless your all CASH  you maybe sitting there looking at deals with no ability to buy them.. thats what happened 08 to 2011 to 2012.. you could not get an investor loan to save your life..   so do keep that in mind.. todays rates and ability to get a loan with very low down will change if there is a major correction.. you can count on that.

 

@Kelsey Mortimore

In my very humble opinion the crash could be a long ways out. What would normally be a crash is somewhat offset but the abundance of cash in the investor space from a long bull run and the transfer of wealth & equity often happens under our very noses. Not to mention other things like interest rates and capital being manipulated by the government to be what they are.

All that to say. You may wait a long time if you wait for a crash.