Anyone else waiting to buy once things settle?
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Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
3yYou have 6+ million reasons to trust your own judgment...nice work.
69 Replies
- Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes3y
Quote from @Jack B.:
Own a 6+ million dollar portfolio currently. Was more until recent price declines. Waiting to buy more once things settle, rates go back down, etc.
The question is WHEN will things settle down? What is settle down?
There will always be "something" to contend with.
- 3yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
it's a good question, but I don't know what "settling" looks like, there will just be more turmoil and more changes next year and the year after and the year after.
- Member since 2020 · 671 posts · 937 votes3yYeah, but you're not trying to buy and hold, right? If I remember correctly, you're flipping in SF. What do the numbers look like for you if you rent those properties out instead?
Quote from @Carlos Ptriawan:
price already going up.
rates already going down. - Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Chris John:
Yeah, but you're not trying to buy and hold, right? If I remember correctly, you're flipping in SF. What do the numbers look like for you if you rent those properties out instead?Quote from @Carlos Ptriawan:
price already going up.
rates already going down.buy and hold for 3-4 year is the plan. If I rent it out the DSCR would be 0.9 with 7% rate.
Price is already going up 100k-200k here especially for top notch condition, some realtor suggestion in BP really works.
What I can do also buy something with 1.0 DSCR ; then still sell it in 3 years, based on chart by summer next year we would reach 2022 price level again.
- Member since 2019 · 7k+ posts · 4k+ votes3y
The thing that I no longer chase rental property is not because of the mortgage rate but because of the tax obligation when I sell ; I don't want to pay any tax LOL
- 3yDevin JamesPro MemberDeveloper · Orlando, FL · Member since 2018 · 502 posts · 306 votes
Hey Jack B.,
If the numbers work, im all in
- Member since 2020 · 671 posts · 937 votes3y
" buy and hold for 3-4 year is the plan. If I rent it out the DSCR would be 0.9 with 7% rate."
Are you financing these? How much down?
I don't think I'm comfortable with a 0.9 DSCR. You've shown yourself to be a very bright guy, so I don't worry about you though. haha. - Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Chris John:
" buy and hold for 3-4 year is the plan. If I rent it out the DSCR would be 0.9 with 7% rate."
Are you financing these? How much down?
I don't think I'm comfortable with a 0.9 DSCR. You've shown yourself to be a very bright guy, so I don't worry about you though. haha.haha , 30% LTV is my standard now, down is $300K, in rough calculation 35% LTV would meet 1.0 DSCR.
But the one that I purchased is having free ADU, with 30% LTV and free income from ADU actually my mortgage is only $1200 with 5% rate LOLthis is why I kept saying there're still lot of opportunities, I sell high and buy cheap at the same time lol, cant you imagine having house in bay area and only paying $1200 ? with midwest rental income still running high and all CD deposit return me 4-5%, I am actually living for free because money generated from interest is equal to net mortgage payment lol
- New to Real Estate · Twin Falls ID + Des Moines, IA · Member since 2022 · 12 posts · 5 votes3y
I read this the other day talking about potential opportunities in the current / upcoming market and figured I'd share. Credit: Alan Corey
1. Short-Term Rentals in A+ locations: A recession means fewer vacations. Layoffs will squeeze mom and pop operators in expensive locales. This combo should provide discounted opportunities for furnished top-tier properties in off-peak season like mtn towns and snowbird states.
2. Commercial RE: Operators that have to refi soon will have to do so at a much higher rate, possibly making properties negatively cash flow. Selling at a discount before a refi will be the best way out for many.
3. Luxury Apartments Under Construction / In Dev: Will be very difficult to sell brand-new lux this spring. Be ready for to neg a ton of free upgrades and having closing costs paid for. They will be less inclined to drop price to protect comps, but will give you the world outside of this.
4. Empty Lots in Half-Built Neighborhoods: Builders developing neighborhoods will feel the pinch and most likely stop building their in-progress nabes until rates change. Buying the unfinished lots will come with a steep discount if you can offer cash or buy more than one.
5. iBuyer Inventory: Tech companies that overpaid for homes in the last 3 years are still paying interest on the funds they borrowed to buy these assets. They will sell for a huge loss to a hedge fund, but the retail buyer making low-ball offers on listings could see success.
- 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Andrzej Lipski:
That kind of behavior was when rates were on the way down after the recovery from the 2008 crisis.Quote from @Jay Hinrichs:
think about this.
when rates were super slow how much over bidding was going on 50k 100k 200k over ask or market value all to capture that 3% rate.
now you can buy down a 15 year and get about 4 to 4.2 but pay way less.. why wait.
During the crisis few people could actually capitalize on the buying opportunities because lenders were not lending, home owners were foreclosed on, portfolios were collapsing like houses of cards. Most money was frozen in assets because they were upside down. Only those who has cash on hand were able to deploy it.YUP I lived through that one . it was insane. loans that were performing but had their 5 year calls were not getting refinanced putting perfectly good projects into BK. 5 out of our 6 credit lines that were performing got called.. As the banks shed Real Estate from their balance sheet. Keep in mind Many Many BP members did not start investing until 2010 or later so they really have no real personal concept of what happened or can happen..
- 3yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Account Closed:
Yeah, I just bought a $750,000 value in Phoenix for $525,000 and a $350,000 value in Phoenix for $210,000 why do I care what interest rates are? So, I'm turning the $750,000 value into an STR and selling the $350,000 Near Grand Canyon Univ. for $245,000. Any takers. ;-) Quit worrying about interest rates and prosper.Quote from @Jay Hinrichs:
think about this.
when rates were super slow how much over bidding was going on 50k 100k 200k over ask or market value all to capture that 3% rate.
now you can buy down a 15 year and get about 4 to 4.2 but pay way less.. why wait.
Sounds like in a small way History is repeating its self in the PHX market with massive depreciation. And we are hearing from others about rents falling that market.. last go around PHX got CRUSHED.. - Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes3y
Definitely not on a buying spree like I wished. But I'm always ready and looking at deals. It's certainly not as easy to find deals like it was in ~2019, when EVERYTHING was a slam dunk lol.
- 3yJay ThomasPro MemberReal Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
In the current Real Estate market, it doesn't make sense to buy right now. Even if you have cash on hand and could pay for properties in full, the high interest rates mean that they will likely operate at a loss each month. This combined with decreasing prices makes buying Real Estate a less attractive option compared to having equity in these properties or keeping cash on hand. The uncertainty of the situation is also worrying, as I've recently had 4 vacancies with one of them taking up to 4 months before being filled again. To ensure peace of mind and security, it's best to avoid investing in Real Estate right now until we know what will happen next.
- Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes3y
Quote from @Jack B.:
Own a 6+ million dollar portfolio currently. Was more until recent price declines. Waiting to buy more once things settle, rates go back down, etc.
I buy , sell and keep properties monthly. If you are buying 25- 30% ( my clients about 10 -15% ) below the markets and getting 15= 20%( my clients 10- 14% ) net cap who cares about up or down, 10- 20% in value. Just in the 2 weeks I put 25 SF and an 18 UNIT under contract from the seller, already have them under contract with the buyers. All are double. Digit net caps. So up or down a bit , not an issue.
With 6 mill why would you even wanting to do anything else, just go and enjoy life
All the best
- Investor · CA · Member since 2023 · 196 posts · 107 votes3y
Quote from @Jack B.:
Own a 6+ million dollar portfolio currently. Was more until recent price declines. Waiting to buy more once things settle, rates go back down, etc.
6 million in today's real estate market is just getting started. You better keep looking and keep at it. You got a long way to go. But great that you are active in real estate investing! Don't ever stop!!
- 3yMatt DaylorBusiness MemberRealtor · Fall River, MA · Member since 2019 · 11 posts · 4 votes
Prices have not declined in MA or RI. Even with around 7% rates, open houses have been packed and some listings are getting multiple over asking offers again. November and December was very slow. Picked way up after the new year.
- Realtor · Ogden, UT · Member since 2019 · 338 posts · 415 votes3y
This probably varies from market to market but here in Utah, our demand is such that inventory is still really low and transaction volume is decent even at this super high rates.
I'm very confident that the moment rates soften, prices will jump right back up. There's a true supply and demand issue right now.
My thoughts are to buy buy buy right now. Things are on sale. I'd rather pay a lower purchase price and refi later, than purchase higher with a lower rate out the gates.
Good luck!
- Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes3y
In my view, you buy if the cash flow makes sense. Even if rates are higher than you'd like. You can refinance later if or when rates go down.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3yI am confused, this makes no sense to me.
Quote from @Jack B.:
Waiting to buy more once things settle, rates go back down, etc.
So, you'd like to wait to buy until the cost of buying is greatest, with rewards of having bought being least?
I want to buy when the blood in the streets is so deep I need hip-weighters to get around. - Lender · CA · Member since 2018 · 638 posts · 393 votes3y
Quote from @Jack B.:
Own a 6+ million dollar portfolio currently. Was more until recent price declines. Waiting to buy more once things settle, rates go back down, etc.
Truthfully not at all, if prices go down, I'm buying more, if prices go up I'm cash out refinancing and buying more. I'm still seeing a lot of great deals out there and so are our clients. I would change my strategy a bit and focus heavily on perfecting my numbers. But if you can make a deal work right now when rates are 7-9% you're going to look like a genius when rates are pressured back down to the 4-5% range. I have no idea when rates will come down but it is amusing watching all the people who said they would buy when prices came down now continue to sit on the sidelines waiting for rates to go down (which will cause prices to rise again).
- Investor · NJ · Member since 2022 · 155 posts · 224 votes3y
Quote from @James Hamling:
I am confused, this makes no sense to me.Quote from @Jack B.:
Waiting to buy more once things settle, rates go back down, etc.
So, you'd like to wait to buy until the cost of buying is greatest, with rewards of having bought being least?
I want to buy when the blood in the streets is so deep I need hip-weighters to get around.I agree. I'm building in hot areas that just aren't affected by much right now. I will be fine in a downturn and way ahead when things pick up everywhere. Buy where people are moving to in great #s. Thats why I questioned Jack earlier if he was limiting himself to Seattle, it's a big country with a lot of markets that will continue to outperform regardless. Choose wisely...
- Member since 2020 · 671 posts · 937 votes3y
"I want to buy when the blood in the streets is so deep I need hip-weighters to get around."
The problem is there's a million sharks and almost no blood to go around because everyone is sitting on 30 yr fixed rate mortgages at low rates. Volume is going to be low forever. Sucks to be a kid or someone that doesn't already own real estate, I guess.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3y
Quote from @Chris John:
"I want to buy when the blood in the streets is so deep I need hip-weighters to get around."
The problem is there's a million sharks and almost no blood to go around because everyone is sitting on 30 yr fixed rate mortgages at low rates. Volume is going to be low forever. Sucks to be a kid or someone that doesn't already own real estate, I guess.
When it was easy to find a property at right price, finding financing was all but impossible. Once financing got easy, competition went sky-high and so did prices. It's always going to be something. The majority of people who bought properties over last 10 yrs, were told they were idiots when they did it; price is too high, rents too low, economy too slow, etc etc.
There is a choice to be made; excuses or actions, can only do 1.
I am not saying it is easy today, not with today eyes, it's only ever "easy" in hindsight. So, expect there to be barriers, expect it to be difficult, expect to have to over-come something.
If waiting for cheap-$, plentiful supply, low competition and high tenant demand, well, you let me know when that has ever happened, ever.
See the opportunity of the moment. Most are feeling same as you, so, don't do what others are doing, be different. Look where others don't. Engage how others don't.
There is blood in the streets, so opportunity is NOW.
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes3yWhen I first started in real estate, "great" interest rates were 8% I made a lot of money. Rates went to 14%, I still made money just not as much. At 18% I sat out the season. We were then told by the "experts" that rates would never go to 6% again. They were wrong. ;-)
Quote from @Dan H.:
Quote from @Account Closed:
I'm sorry you haven't been able to match the discounts, but keep trying, you might be able to do as well, (probably not) LOLQuote from @Dan H.:
Quote from @Account Closed:
Yeah, I just bought a $750,000 value in Phoenix for $525,000 and a $350,000 value in Phoenix for $210,000 why do I care what interest rates are? So, I'm turning the $750,000 value into an STR and selling the $350,000 Near Grand Canyon Univ. for $245,000. Any takers. ;-) Quit worrying about interest rates and prosper.Quote from @Jay Hinrichs:
think about this.
when rates were super slow how much over bidding was going on 50k 100k 200k over ask or market value all to capture that 3% rate.
now you can buy down a 15 year and get about 4 to 4.2 but pay way less.. why wait.
Even with those discounts, purchasing at value in beginning of 2022 with high LTV would have resulted in the higher price but lower rate having the lower monthly payment. I would also claim that the value is not the value of early 2022 but what the value is today which is likely close to what you paid.
Good luck
I am saying even with the discount you quoted, the monthly P&I is higher than it would have been for high LTV than if purchased at your stated value price at the beginning of 2022. The interest rates have more than doubled, but your stated discount is only 30% on one property and 40% on the other. Can you not see the math? I purchased $4M in Dec 2021 at high LTV with rates far less than 50% of what I could obtain today. My monthly P&I is significantly less than if I purchased those same properties today at the type of discount you indicated you got on your two "deals". Granted rates can drop, but I am not forecasting that in my underwriting.
Plus, as I indicated, if RE is being purchased at that price does it not imply that the previous high value is no longer the current value? I lean towards the property is worth less than the value you attributed (even though that may have been the market high value).
The reality is I am not finding properties that meet my buying criteria because I like to leverage my properties. I am not going to purchase something as much effort and risk as residential RE unless the return is significantly higher than I can obtain with more passive options. I am not finding RE that meets my buy criteria in spite of getting many (dozens) off market offerings in my mailbox daily. It is because the P&I has doubled since early last year. This diminishes the return and I expect outstanding return for residential RE (typically I have achieved the infinite return via value add/refi). Maybe my expectation on residential RE return is too high; apparently my expectation is higher than current market is providing.
From 2012 through early 2022 was an incredible time for RE investing. Finding infinite return properties was more an issue of how to finance than difficulty of finding. Double digit annual appreciation in many markets. High rent growth in many markets. Few investment options provided better returns. Not every period in time is going to have RE be the best investment option available.
I am happy for you that you like those discounts and are happy with those purchases.
Good luck
My point is that there is still a way to make money in real estate and people who are sitting on the sideline at 7% are missing an opportunity.
Oh, I forgot to mention, I don't use real estate agents on the buy or the sell, (that saves a pretty penny). Nothing wrong with real estate agents, it just isn't my method. - 3yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Quote from @James Hamling:
Quote from @Chris John:
"I want to buy when the blood in the streets is so deep I need hip-weighters to get around."
The problem is there's a million sharks and almost no blood to go around because everyone is sitting on 30 yr fixed rate mortgages at low rates. Volume is going to be low forever. Sucks to be a kid or someone that doesn't already own real estate, I guess.
When it was easy to find a property at right price, finding financing was all but impossible. Once financing got easy, competition went sky-high and so did prices. It's always going to be something. The majority of people who bought properties over last 10 yrs, were told they were idiots when they did it; price is too high, rents too low, economy too slow, etc etc.
There is a choice to be made; excuses or actions, can only do 1.
I am not saying it is easy today, not with today eyes, it's only ever "easy" in hindsight. So, expect there to be barriers, expect it to be difficult, expect to have to over-come something.
If waiting for cheap-$, plentiful supply, low competition and high tenant demand, well, you let me know when that has ever happened, ever.
See the opportunity of the moment. Most are feeling same as you, so, don't do what others are doing, be different. Look where others don't. Engage how others don't.
There is blood in the streets, so opportunity is NOW.
>If waiting for cheap-$, plentiful supply, low competition and high tenant demand, well, you let me know when that has ever happened, ever.
In my market 2012 to 2015 met each of those criteria. Rates were not as low as they ended up going, but were very low historically. Appreciation and rent growth was double digits most of those years. I purchased multiple properties with my offer being the only one received. In addition finding value adds that did not have some of the value add already added into the asking price was easy. It was almost cannot miss.I do not look at the current market as nearly as good especially if using financing. Many syndicators have slowed or stopped their new offerings. This indicates that some of the most educated regular RE purchasers are not finding properties that underwrite to their desired standards.
Simple math states that if the rates have more than doubled, the P&I monthly cost doubles. This implies for similar P&I payment, the property has to be priced at about 50% of what it was before the rate increase. It is a rare market (Are they any that have fallen close to 50%?) that has fallen 50% from the recent market high. This makes it challenging to purchase properties that produce the same COC when financed that could have been achieved at the beginning of 2022.
I occasionally still analyze deals but have not purchased since December 2021 (I purchased $4m that month). I have only made one offer since that time, and it was not close to the accepted price. The person who purchased was willing to have a return far lower than I require (I talked to him about his numbers).
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