Are you going to do buy and hold in 2023?

Buying & Selling Real Estate
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Are you going to do buy and hold in 2023?

Jin Zhang
Rental Property Investor · Member since 2019 · 137 posts · 42 votes

Hi everyone, 

I have been seeing a lot of discussions about the real estate trend in the coming two years. Due to the raising interest rate, the majority has been predicting that the real estate price is likely to drop in 2023 and 2024. The drop could be up to 20% in certain areas. I am wondering if people are still doing buy and hold? If we purchase a cash flowing property, the property value might drop 20% by the end of 2023 or 2024. This could mean fewer deals due to higher entry price. Should we just wait a bit for the price to drop a bit more? Are you still actively buying buy and hold deals? What is your view on this? Anything input is appreciated! 

Thanks,

Jin 

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Account Closed
Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
3y

@Jin Zhang

Interest rates and property values are sort of irrelevant to me. Don't get me wrong, I won't buy a property that is way over priced, but at the end of the day, I could care less what the interest rate is and the purchase price is so long as the deal meets my cash flow goal/need. And so what if property values drop in the next year or so. We're talking buy-and-hold so no plan to sell it anyway.

Lastly, I have never heard a highly successful Real Estate Investor say "Gee I'm so glad I timed the market and waited..." 😀

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  • Account Closed
    Rental Property Investor · Canton, OH · Member since 2017 · 1k+ posts · 1k+ votes
    3y

    @Jin Zhang

    Interest rates and property values are sort of irrelevant to me. Don't get me wrong, I won't buy a property that is way over priced, but at the end of the day, I could care less what the interest rate is and the purchase price is so long as the deal meets my cash flow goal/need. And so what if property values drop in the next year or so. We're talking buy-and-hold so no plan to sell it anyway.

    Lastly, I have never heard a highly successful Real Estate Investor say "Gee I'm so glad I timed the market and waited..." 😀

    10Reply
  • Brian Barch
    Member since 2022 · 272 posts · 253 votes
    3y

    I keep my criteria the same, which means there are less possible deals out there. But it doesn’t mean I don’t make a deal. 

    I prefer a market like this with less competition.

    I’m playing the long game

    1Reply
  • Jin Zhang
    OP
    Rental Property Investor · Member since 2019 · 137 posts · 42 votes
    3y
    Quote from @Account Closed:

    @Jin Zhang

    Interest rates and property values are sort of irrelevant to me. Don't get me wrong, I won't buy a property that is way over priced, but at the end of the day, I could care less what the interest rate is and the purchase price is so long as the deal meets my cash flow goal/need. And so what if property values drop in the next year or so. We're talking buy-and-hold so no plan to sell it anyway.

    Lastly, I have never heard a highly successful Real Estate Investor say "Gee I'm so glad I timed the market and waited..." 😀


     Thanks for sharing your view! It is great to learn that people are still investing. It makes sense! 

    0Reply
  • Jin Zhang
    OP
    Rental Property Investor · Member since 2019 · 137 posts · 42 votes
    3y
    Quote from @Brian Barch:

    I keep my criteria the same, which means there are less possible deals out there. But it doesn’t mean I don’t make a deal. 

    I prefer a market like this with less competition.

    I’m playing the long game


     Thanks for sharing your insights with me! Do you mind me asking if you are investing in long, mid, or short term rental in the current market? 

    0Reply
  • Justin BeasleyPro Member
    Pigeon Forge, TN · Member since 2020 · 102 posts · 69 votes
    3y

    Yes. Always looking for and finding value. Market conditions change. What I purchase, how I finance it, and what I am willing to pay for it change as well.

    Also, I love to buy and hold but I always purchase with a understanding of the different options I have to get my capital back. 

    [email protected]
    0Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    I am personally buying and holding, buying real estate at a 50% discount and holding until we see another market like April 

    2Reply
  • John Barrett
    Rental Property Investor · Everett, WA · Member since 2015 · 458 posts · 386 votes
    3y

    @Jin Zhang I am still looking at deals and hope to purchase more over the next couple of years.  I do look at the increasing costs due to interest rates and prices in my area still being high but if the deal makes sense we will move on it.

    Near term the focus has been on getting my units undergoing rehabs complete and rented.  Rent growth has been significant and just raising rents can have a dramatic affect on your profitability. Additionally, I am looking at an opportunity to add an additional unit to an existing multifamily property.  Even with all the costs of permitting, plans, materials and construction it will provide a solid return.

    John

    2Reply
  • Paul Cionczyk
    Real Estate Broker · Glenview, IL · Member since 2022 · 7 posts · 6 votes
    3y

    If the numbers make sense for your investing strategy, then they make sense and if you are buying and holding for a longer term, then you will figure it out. Understand rent growth in your specific market, will they keep pushing up, go down, or stay flat over the next several years. How will that impact your investment goal for that property? Interest rates are higher so less people you are competing with to buy. If you hold long term you will pay down the property and if prices pull back they will return at some point. 

    Don't plan for mortgage rates to come down in the future to make your numbers work. If you buy a place at today's interest rates, but prices do pull back, you may not be in a position to refinance the property in order to take advantage of those lower rates in the future. I.E. if you need 25% equity/75% loan but values went down, then the only way to get that 75% loan is by having paid the current mortgage on the property down some or bringing more money to the table in order to refinance to get that lower rate. Eventually you will get there but don't count on it to make a deal happen, if you need rates to be lower to get your required return, then the deal you are trying to buy today likely isn't a deal.  

    Paul

    2Reply
  • Jason Nguyen
    Real Estate Agent · Fairfax, VA · Member since 2019 · 79 posts · 68 votes
    3y

    I will hold strong in 2023 and 2024. It’s the best time to accumulate any property on market right now. 

    When interest rates go up 1%, property value will need to adjust -10% in order for the buyer to qualify for the same amount of loan or same monthly payment. Example, a $500k loan with 5% interest rate has the same if not exactly the same payment as a $450k loan with 6% interest rate. We’re seeing CPI dropping back to 7.7% from 8.2%. This is an indicator that interest rate will drop significantly once inflation is cooling down. I’ll hold strong in 2023/2024 while accumulating more properties at a cheaper prices and refinance once interest rates drop back down. At that time, I’ll probably see a huge equity gain because people will start buying homes again due to low interest rates and home prices will continue to appreciate.

    2Reply
  • Melvy Concepcion
    Member since 2022 · 21 posts · 11 votes
    3y
    Quote from @Eliott Elias:

    I am personally buying and holding, buying real estate at a 50% discount and holding until we see another market like April 


     Bro, where are you getting these 50% discounts? share the wealth bro. Lol

    3Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    3y

    Of course, when you are getting double digest net caps (based on cash purchase) and buying all in at 65- 70% of the current value, who cares about up or down 10- 15% 

    Good Luck 

    0Reply
  • Melvy Concepcion
    Member since 2022 · 21 posts · 11 votes
    3y

    Buying and Holding is the game you play in this type of market we are living in now days, in my humble opinion. If you're planning to buy, plan for an exit strategy at least 3 to 5 years from now. Flipping is a dangerous game at the moment, especially for rookie investors. Study your market and research the Short Term Rental, Mid Term Rental and Long Term Rental for your area. You got this!

    1Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    3y
    Quote from @Melvy Concepcion:
    Quote from @Eliott Elias:

    I am personally buying and holding, buying real estate at a 50% discount and holding until we see another market like April 


     Bro, where are you getting these 50% discounts? share the wealth bro. Lol

    Its all about your network and knowledge, I got one last month all in 60k, value 125kishk rents 13- 1400 


    1Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    3y

    20% is pretty hyperbolic. The housing collapse 15 years ago, the worst in history, from peak quarter to low quarter was a 19% drop. From peak year to low year was a 10% drop. Use that as a context to understand what the world would be like when people are predicting a 20% drop.

    [email protected]301-893-4635Podcast Guest on Show #192
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    1Reply
  • Melvy Concepcion
    Member since 2022 · 21 posts · 11 votes
    3y
    Quote from @Bob S.:
    Quote from @Melvy Concepcion:
    Quote from @Eliott Elias:

    I am personally buying and holding, buying real estate at a 50% discount and holding until we see another market like April 


     Bro, where are you getting these 50% discounts? share the wealth bro. Lol

    Its all about your network and knowledge, I got one last month all in 60k, value 125kishk rents 13- 1400 



     Wow, That's amazing!

    0Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    All I am doing is buying and holding right now. Seizing the opportunity to buy as much as I can while the market is down, 10 years in the future I will look back and thank myself 

    3Reply
  • Mary L.
    Rental Property Investor · Member since 2020 · 41 posts · 54 votes
    3y

    @Jin Zhang, I found 2 "good deals in good B+ location" (20% off from market price and 30% off from the peak in March 2022) last month, under contract, but I cancelled both 2 good deals last minute, because 3 more even better deals were listed on the MLS before my close of escrow. I have been buying real estate properties every single year in Las Vegas since 2010, I have been doing great, but I got freaked out last month. I'm going to pause purchasing additional real estate properties after 12 years. I will not buy and hold in 2023, to me, buying a good deal today maybe a bad deal next month, it is like trying to catch a falling knife. I will wait for the falling knife hit the ground floor, then buy again.

    2Reply
  • Jin Zhang
    OP
    Rental Property Investor · Member since 2019 · 137 posts · 42 votes
    3y
    Quote from @Eliott Elias:

    I am personally buying and holding, buying real estate at a 50% discount and holding until we see another market like April 

    This is a great strategy! Are you finding opportunities to buy at 50% discount in the current market? Where are you finding them? MLS? Wholesale? Direct to seller? Or other?
    0Reply
  • Jin Zhang
    OP
    Rental Property Investor · Member since 2019 · 137 posts · 42 votes
    3y
    Quote from @Paul Cionczyk:

    If the numbers make sense for your investing strategy, then they make sense and if you are buying and holding for a longer term, then you will figure it out. Understand rent growth in your specific market, will they keep pushing up, go down, or stay flat over the next several years. How will that impact your investment goal for that property? Interest rates are higher so less people you are competing with to buy. If you hold long term you will pay down the property and if prices pull back they will return at some point. 

    Don't plan for mortgage rates to come down in the future to make your numbers work. If you buy a place at today's interest rates, but prices do pull back, you may not be in a position to refinance the property in order to take advantage of those lower rates in the future. I.E. if you need 25% equity/75% loan but values went down, then the only way to get that 75% loan is by having paid the current mortgage on the property down some or bringing more money to the table in order to refinance to get that lower rate. Eventually you will get there but don't count on it to make a deal happen, if you need rates to be lower to get your required return, then the deal you are trying to buy today likely isn't a deal.  

    Paul

    Thanks for sharing this! This is great advice! Not thought about the refinance situation. It is good for me to keep it in mind. :)
    0Reply
  • Jin Zhang
    OP
    Rental Property Investor · Member since 2019 · 137 posts · 42 votes
    3y
    Quote from @Bob S.:

    Of course, when you are getting double digest net caps (based on cash purchase) and buying all in at 65- 70% of the current value, who cares about up or down 10- 15% 

    Good Luck 

    Thanks for sharing! Are you seeing people buying at 65-70% of the current value in your market? 
    0Reply
  • Jin Zhang
    OP
    Rental Property Investor · Member since 2019 · 137 posts · 42 votes
    3y
    Quote from @Mary L.:

    @Jin Zhang, I found 2 "good deals in good B+ location" (20% off from market price and 30% off from the peak in March 2022) last month, under contract, but I cancelled both 2 good deals last minute, because 3 more even better deals were listed on the MLS before my close of escrow. I have been buying real estate properties every single year in Las Vegas since 2010, I have been doing great, but I got freaked out last month. I'm going to pause purchasing additional real estate properties after 12 years. I will not buy and hold in 2023, to me, buying a good deal today maybe a bad deal next month, it is like trying to catch a falling knife. I will wait for the falling knife hit the ground floor, then buy again.

    Got you! Definitely not fun to catch a failing knife.
    0Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    3y
    Quote from @Jin Zhang:
    Quote from @Bob S.:

    Of course, when you are getting double digest net caps (based on cash purchase) and buying all in at 65- 70% of the current value, who cares about up or down 10- 15% 

    Good Luck 

    Thanks for sharing! Are you seeing people buying at 65-70% of the current value in your market? 

     Yes, 

    0Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    3y

    Be careful with the information on the forums.  There is a lot of talk that is not supported with real life purchases.  7+% interest rates coupled with high prices and tight commercial lending is making DTIs, DSCs, and LTVs very challenging.  Most of the investors that are buying right now likely have full time deal flow pipelines and access to cash and private money.  All the talk on the forums about "the market" is just talk without information on real transactions.

    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    3y

    Doubtful. The cost/benefit, risk/reward, effort/return on RE vs other asset classes right now isn't worth it. 

    1Reply
  • Benjamin AakerPro Member
    Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
    3y

    I'm still buying and holding. In my area, though, the asking prices are lagging what should be the true value of the properties. As the interest rates go up, buyers can pay less, but sellers are still intoxicated by the prices they were getting 6 months ago. That will change. With high rates, if you buy at the right price, you may have the opportunity to refinance lower when rates go down, giving you an instant cash flow increase and later a bump in value.

    1Reply
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