So i've read through the BP ebook and other books related to real estate. Most of them say that the right time to buy for an investor is when there is a lot of inventory and when the prices are low. When exactly is the 'correct time' and where could we find resources for research?
If you are in for the long haul, the right time to buy is whenever you find an opportunity fitting your investing goals and within your means and ability to complete the purchase.
Trying to time any market for the "right time" is foolish, risky and rarely successful.
Set your investing goals and parameters based on the conditions you see around you and then execute to your plan. The market will do what the market will do. Update your plan when appropriate and then continue to execute your plan.
I can also point out a few things Warren Buffet said in 2012. However, I would also note that there has been a lot of activity by REITs like Blackstone, and that has pushed prices higher, and eventually they are going to want to sell. As well, stocks are probably bound to fall, the Fed just printed large amounts of money, and our debt is basically unable to ever be paid back. I get that America has some signs of economic health and strength, but I also see some vulnerabilities. I would just hate to buy three houses now using credit and in three years my wife throws down our ledger on the table and asks "So now we have $600,000 in debt and housing prices fell another 5% this year?"
Anyway, here are the quotes from 24 months ago:
Q: Should I buy real estate?
Warren Buffett: "If I was an investor that was a handy type and I could buy a couple of them at distressed prices and find renters, I think it's a leveraged way of owning a very cheap asset now and I think that's probably as an attractive an investment as you can make now."
Q: Why invest in real estate now?
Warran Buffett: It's a way, in effect, to short the dollar because you can take a 30-year mortgage and if it turns out rates rise, the other guy's stuck with it for 30 years. So it's a very attractive asset class now. (paraphrased)
and "If I had a way of buying a couple hundred thousand single-family homes I would load up on them."
I guess it's clear from his thoughts that he doesn't think Blackstone and so on are artificially inflating prices, or that the weakening middle class, or middle class debt (student loans, for example), or that our economy 70% based on consumer spending (read: a populace that can afford to buy things) are weakness to cause one to steer clear of long term holding of real estate. I also see he is referring to buying for under market value; in fact, that is his schtick in general. However, I don't really know if I can take out a few loans in rapid succession due to the current low mortgage rates and relatively easy lending criteria while at the same time scoring deals. It's a seller's market here, and foreclosures are at a relative low point, and a fair number of deals are attracting cash (read: loans aren't a very competitive way to purchase, and thus the deals are going to go to folks besides me). I also had my eye on houses that were pretty much plug and play as far as maintenance and in regard to the class of the renter I could attract. Fixer-uppers just don't quite fit the bill for those goals as much as they do fit decently well with cash purchases.
I guess buying slowly with cash and trying to refi in time to catch mortgage prices below 5% is a potential goal. Or I could come to feel comfortable buying with cheap money now, and weathering a drop in housing prices seeing as how I'm trying to buy a very rentable house and hold it 25 years.
There is no "right time" to fall in love.
There is no "right time" to die.
The is a right time to move forward; now!
I assume you mean buying real estate, because you would probably have to agree that the right time to buy into a mutual fund is not directly following a year that showed 30% gains... As you know from probability, the chance of back to back to back 30% gains occurring is small. You also know the dictum in the stock market to "buy low and sell high." While it's hard to look forward and see the future, and easy to look back and see the past, it's also true that you have to have good reasons for thinking that a large gain is going to be followed by more large gains, and I don't know that the national corporate scene justifies that kind of sanguineness. So your advice is relevant to being born, falling in love, real estate purchases, and dying, but not stocks I am assuming?
It's meant moving forward in a positive context regarding profitable deals and buying property. If you find a deal that works, you move it forward. I have no interest in or knowledge of stocks and this is a property website, no?.
I see what you mean. But using a science metaphor, a theory has to account for all the data, or it needs to be amended. One can't theorize that "All swans are white" and then see an example of a black swan and still have the theory be valid.
So when you say that it's rosy rosy rosy, if it can be shown that that doesn't hold true in regard to today's stock market, then the theory is distinctly about "real estate, love, birth, and death," but not stocks. The relevance is that it speaks to the breadth of the theory. If the theory is meant to be limited to those four things, then okay, but if it's meant to be a very broad prescription, to encompass stocks as well, the theory doesn't hold water, and thus the advice to buy real estate now is called into question.
Well, with respect, I don't think there is much substance to that metaphor. It could be dangerous in fact to counsel neophytes to proceed assuming that anytime is the right time. Certainly you see that to offer that advice in early 2008 would have turned out poorly for the buyer? Unless they had 8 years to wait, but those would have been some trying times. Better to *wait* until 2012 to buy I believe. All other things being equal (e.g., lending criteria, a person's credit, etc). Now, it might be a good time to buy now, due to things such as inflation probably about to kick up, or mortgage rates being low, but I believe that if we re-enter a recession for reason x or y, the advice would look a bit too sanguine in that case. I get that analysis paralysis is not good. But there are reasons that governments and private enterprises publish statistics and so on - to assist folks in predicting the future. It seems like your light is always green.
It is always the right time to buy, if you find a good deal.
This is especially true if you are buying long term holds. Real estate can be very forgiving over time if you buy well enough and have a good cash flow cushion. Even if the market crashes and you are underwater all that means is you can't sell. If you have good cash flow then you don't need (or really want) to sell.
If you are a wholesaler you should not have a lot at risk and your "hold" time should be measured in a small number of weeks at most. If it is more then you don't have a good deal. It should be hard for a market to swing so fast that someone will get stuck with what should have been a good wholesale deal.
The one aspect where someone could get caught (and many did in the crash) is the rehabber. Even if you do buy well at the time if there is a dramatic market shift in the few months you are holding it you could have an issue. However if you buy smart you sill are more likely to just break even or get a small profit rather than a big one. This is actually why I always cringe when new people talk about being okay making (Insert absurdly small profit here) just to get some experience.
If you wait for the perfect time you will never do anything unless you can predict the future. Not many people (especially talking heads that publish any of this crap) saw the RE market crashing last decade. Nobody saw the economic sh*t storm coming in 2008. People have been locking in "historically low rates" since about 2001 when they consistently dipped under 7% and have trended down continuously since then. Nobody knows what is going to happen in the future. You know when you were at the top of the market when it goes down, when at the bottom when it goes up, when rates were at their lowest when they go up, etc...
@Shaun Reilly, I agree with everything you say except one technical point; I and others did see the sh1t coming in 2006 and proceeded to liquidate portfolios. However, for openly making warning statements about the crash we were publicly derided and our credibility dismissed.
110% first time buyer mortgages were just as economically ridiculous than as they would be now, lol.
Quite a few saw the crash coming, some were like rabbits in the headlights, others made lotsa money and many were powerless and or lacked the conviction to act. There was a lot of analysis paralysis floating around too. So the "right time" to act is when you choose to.
Surving the crash has made me philosophical.....
That's certainly ONE idea in stock investing. But, it's not the only one...
There are plenty of stock investors who will advocate buying stocks that generate large dividends for shareholders. The idea is that if you hold the stock long enough, the accrued dividends to the shareholder will produce a yield that will be strong, regardless of the performance of the underlying stock price.
In my opinion, that is the equivalent of a long-term buy-and-hold property. Your return is more defined by the cash flow the property generates than by the value of the underlying asset.
Now, your "buy low, sell high" idea is obviously a popular one, and in my opinion, rehabbing/flipping/short-term-holding is the analogy of that particular strategy.
110% first time buyer mortgages were just as economically ridiculous than as they would be now, lol.
Quite a few saw the crash coming, some were like rabbits in the headlights, others made lotsa money and many were powerless and or lacked the conviction to act. There was a lot of analysis paralysis floating around too. So the "right time" to act is when you choose to.
Surving the crash has made me philosophical.....
Note I said:
"Not many people (especially talking heads that publish any of this crap) saw the RE market crashing last decade."
You were obviously one of those crazy common sense people that saw things were ridiculous. But as you said you would be dismissed and chided for saying anything negative about things until they went to hell. Hence this is why I don't really care at all about any of the BS and useless data that gets published by any of these outlets. At least not anything past the raw data. Once anyone "interprets" it then it loses all the value.
The right time is when the numbers work :D - I would say that they numbers TEND to work more often when inventory is high and prices are low. But I would caution creating a correlation between the two. Just because there are a ton of properties on the market and prices are low does not make them all good investments, and conversely just because demand is high and prices are high does not make them all bad investments.
IMHO Appreciation is speculative and hard to predict, so each prospective investment must go through the ringer irrespective of speculated appreciation.... and if it works it works. Timing is irrelevant if you buy right each time.