Is this the best or worst time to get into real estate?
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
Is this the best or worst time to get into real estate?
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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votesQuote from @Miles Atkins:
Quote from @Bruce Woodruff:
This is the best (but hardest) time for a newbie to get into RE. This market is scaring away all of the lookie loos who have been buying up anything they could. Now they have to be careful......
Bit new to the market aspect of things. Is this the hardest time to get into real estate because the prices are high?
High is a relative thing.
Most would say rates are high, these are kind of average. I do think rates cannot stay at this level indefinitely due to debt, but if you think we're going back to 3% I would bet against that. 5% ish will be the new norm. If rates went down to 5% today, a lot of these listed houses in good markets would be listed for about an extra $10k-$20k per $100k listed, at least. In really growing markets probably closer to 25k. Do the math on "high" rates and being negative cash flow owning the underlying asset versus that extra increase in outright house price and difference in cash up front. Going for good markets is now more key than ever, you'll get substantially higher cash flow + appreciation if you weather the first couple or so years. Only in '08-'22 were people buying and outright cash flowing, it was a short lived thing. You'll cash flow on a purchase in 2023 in 2025-2027 if you bought in a good area.
47 Replies
- Investor · Charleston, SC · Member since 2011 · 606 posts · 413 votes3y
Yes..sooo true! You will do your best creative deals and use less money in doing so when the market is tough and you are forced to learn the fundamentals, run the analysis and due diligence that is important. This is important no matter what the real estate market is doing.
- Real Estate Broker · Memphis, TN · Member since 2020 · 202 posts · 203 votes3y
It was very stressful when the market was going up 20% YoY - as someone who plans to be in RE long-term. Felt like the "skilled" part of investing lost its advantage which I had worked on building. I agree - very happy that good operations will pay off now.
- 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
This is the best (but hardest) time for a newbie to get into RE. This market is scaring away all of the lookie loos who have been buying up anything they could. Now they have to be careful......
- Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes3y
I agree, what makes this time harder is people have to get more creative. I used a HELOC versus traditional financing for example.
I've been saying for the last couple of years now that deals are not found, they are created. Let time do the rest.
People are making it work. They just need to know understand that they will need time on their hands.
It will also be interesting to see what kind of sacrifices people will make to get to their goals. I can't tell you how many 30-something year olds said "housing is too expensive and I don't want a roommate, I'm in my 30s." So what? I would love to use my ADU as a home office and gym. But I'm not. I would rather have the income to propel me into buying more real estate.
- Investor · MI · Member since 2023 · 18 posts · 5 votes3y
Quote from @Bruce Woodruff:
This is the best (but hardest) time for a newbie to get into RE. This market is scaring away all of the lookie loos who have been buying up anything they could. Now they have to be careful......
Bit new to the market aspect of things. Is this the hardest time to get into real estate because the prices are high?
- 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Miles Atkins:
Quote from @Bruce Woodruff:
This is the best (but hardest) time for a newbie to get into RE. This market is scaring away all of the lookie loos who have been buying up anything they could. Now they have to be careful......
Bit new to the market aspect of things. Is this the hardest time to get into real estate because the prices are high?
Prices are (generally) lower around many parts of the country. You can find many 'deals' if you look. The problem for new buyers is that (they think) interest rates are high. They actually are still historically low, quite low, in fact.
- 3yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Rick Albert:
I agree, what makes this time harder is people have to get more creative. I used a HELOC versus traditional financing for example.
I've been saying for the last couple of years now that deals are not found, they are created. Let time do the rest.
People are making it work. They just need to know understand that they will need time on their hands.
It will also be interesting to see what kind of sacrifices people will make to get to their goals. I can't tell you how many 30-something year olds said "housing is too expensive and I don't want a roommate, I'm in my 30s." So what? I would love to use my ADU as a home office and gym. But I'm not. I would rather have the income to propel me into buying more real estate.
So you leveraged capital against your house versus taking capital against a bank? All for a short term financial solution?
I think once people stop missing the forest for the trees, they'll realize the opportunity there is in a premium markets.
There's not a better time to get into a premium market than now and here in the short term. If you're a first time home buyer, you have the opportunity to get your best house at the lowest absolute cost. If you're a first time investor or seasoned one, you're not going to find these houses at these prices in these locations.Everyone trying to capture that extra $100-$200/mo missing out on the actual house in a primo market is going to learn the hard way. The one's that bought when rates were low won't sell and the one's that are getting an inherent discount when rates are high won't sell, they'll rent and re-fi or just rent. Some may flip, just simply because if rates go down it'll move the house prices up.
That $100-$200 cash flow you're saving per month or trying to, you'll spend a greater amount of that in downpayment when rates start to pivot. Good luck then.
- 3yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Miles Atkins:
Quote from @Bruce Woodruff:
This is the best (but hardest) time for a newbie to get into RE. This market is scaring away all of the lookie loos who have been buying up anything they could. Now they have to be careful......
Bit new to the market aspect of things. Is this the hardest time to get into real estate because the prices are high?
High is a relative thing.
Most would say rates are high, these are kind of average. I do think rates cannot stay at this level indefinitely due to debt, but if you think we're going back to 3% I would bet against that. 5% ish will be the new norm. If rates went down to 5% today, a lot of these listed houses in good markets would be listed for about an extra $10k-$20k per $100k listed, at least. In really growing markets probably closer to 25k. Do the math on "high" rates and being negative cash flow owning the underlying asset versus that extra increase in outright house price and difference in cash up front. Going for good markets is now more key than ever, you'll get substantially higher cash flow + appreciation if you weather the first couple or so years. Only in '08-'22 were people buying and outright cash flowing, it was a short lived thing. You'll cash flow on a purchase in 2023 in 2025-2027 if you bought in a good area. - Investor · MI · Member since 2023 · 18 posts · 5 votes3y
Quote from @Bruce Woodruff:
Quote from @Miles Atkins:
Quote from @Bruce Woodruff:
This is the best (but hardest) time for a newbie to get into RE. This market is scaring away all of the lookie loos who have been buying up anything they could. Now they have to be careful......
Bit new to the market aspect of things. Is this the hardest time to get into real estate because the prices are high?
Prices are (generally) lower around many parts of the country. You can find many 'deals' if you look. The problem for new buyers is that (they think) interest rates are high. They actually are still historically low, quite low, in fact.
I don't know too much about the effects of interest rates on real estate investing. Are lower interest rates better for investors trying to find deals?
- Investor · MI · Member since 2023 · 18 posts · 5 votes3y
Quote from @V.G Jason:
Quote from @Miles Atkins:
Quote from @Bruce Woodruff:
This is the best (but hardest) time for a newbie to get into RE. This market is scaring away all of the lookie loos who have been buying up anything they could. Now they have to be careful......
Bit new to the market aspect of things. Is this the hardest time to get into real estate because the prices are high?
High is a relative thing.
Most would say rates are high, these are kind of average. I do think rates cannot stay at this level indefinitely due to debt, but if you think we're going back to 3% I would bet against that. 5% ish will be the new norm. If rates went down to 5% today, a lot of these listed houses in good markets would be listed for about an extra $10k-$20k per $100k listed, at least. In really growing markets probably closer to 25k. Do the math on "high" rates and being negative cash flow owning the underlying asset versus that extra increase in outright house price and difference in cash up front. Going for good markets is now more key than ever, you'll get substantially higher cash flow + appreciation if you weather the first couple or so years. Only in '08-'22 were people buying and outright cash flowing, it was a short lived thing. You'll cash flow on a purchase in 2023 in 2025-2027 if you bought in a good area.Thanks for this level of detail. What do you mean when you say "owning the underlying asset versus that extra increase in outright house price and difference in cash up front." ? And is finding good markets and deals all in the analysis?
- 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votesYou need to do a lot of research and ask a lot of question here on the forum. Start your own thread with the one you just asked me and you will get a lot of valuable info from the folks here...
Quote from @Miles Atkins:
- Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes3yOpportunity will very much depend on the individual. If you're a newbie investor with limited access to capital, you live in an expensive market, or you believe that only properties that meet the 1% rule are good deals, then it may appear there is limited or no opportunity.
Quote from @Eliott Elias:
I believe this Is the greatest opportunity, not because of pricing, but because your weaknesses will be exposed. It is easy to be an investor in a bull market, this market will force many to learn the fundamentals of real estate which will serve to benefit you greatly. A great market does not teach you what a recession will. For those on the fence, get off.
To the experienced investor with multiple properties and access to funds/deals, there is likely much more opportunity to take advantage of current market conditions. There is no perfect equality of opportunity in any market, and certain market conditions will be more advantageous to some rather than everyone. Any shift from the status quo will offer opportunities but it's a matter of (1) having the ability to act on them and (2) actually acting on those opportunities. - Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Eliott Elias:
I believe this Is the greatest opportunity, not because of pricing, but because your weaknesses will be exposed. It is easy to be an investor in a bull market, this market will force many to learn the fundamentals of real estate which will serve to benefit you greatly. A great market does not teach you what a recession will. For those on the fence, get off.
To understand this, need to learn local market. In my market:
- during a bull market, all properties go up in value even bad houses in a bad neighborhood
- during a rebounding market like today (Jan 2023-March 2023), the best house in a good neighborhood goes up in value; most not-ready-to-move-in house, has price greatly reduced
- during the short-term bear market like July 2022-December 2022, most 5BR and luxury homes lost value, but average homes under the median in good condition still receive bids.
This market is the best ONCE you understand how it operates, I see potential money return from everywhere :)
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Eliott Elias:
I believe this Is the greatest opportunity, not because of pricing, but because your weaknesses will be exposed. It is easy to be an investor in a bull market, this market will force many to learn the fundamentals of real estate which will serve to benefit you greatly. A great market does not teach you what a recession will. For those on the fence, get off.
Also in terms of reward/risk, this is the era that's preferable to invest in :
- investing in debt is way better (regardless it's real estate debt or any other activity debts)
- investing in Gov. and corp. bonds and also TIPS
- investing in CD.
While avoiding investment in syndication, especially in office space area.
Hotel syndication, however, seems way better post covid era.
Investing in alternative debt acquisition is good way too to capture the commercial side that's falling due to cap rate issue.Everyday is a different day, some day it's good to purchase a regular house, and rental, but there are day where it's good to buy commodity, when too buy coal mining company, when to buy tech stock and to buy bank stock.
Buying Silicon Valley Bank and Credit Suisses is the best at this time due to massive discount haha LOL - Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes3y
It's neither the best or the worst, overall. Why either or?
As investors, we need to cost/benefit and effort/reward compare RE risk and hassles against risk-free couch returns. Put RE returns against risk and effort-free returns and RE doesn't look that great today, honestly.
So the question shouldn't be is this the best or the worst without also saying in comparison to easy and risk free.
- 3yWill FraserPro MemberReal Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votesEasily yes.
Quote from @Eliott Elias:
I believe this Is the greatest opportunity, not because of pricing, but because your weaknesses will be exposed. It is easy to be an investor in a bull market, this market will force many to learn the fundamentals of real estate which will serve to benefit you greatly. A great market does not teach you what a recession will. For those on the fence, get off.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Steve Vaughan:
It's neither the best or the worst, overall. Why either or?
As investors, we need to cost/benefit and effort/reward compare RE risk and hassles against risk-free couch returns. Put RE returns against risk and effort-free returns and RE doesn't look that great today, honestly.
So the question shouldn't be is this the best or the worst without also saying in comparison to easy and risk free.
Another right approach from you :-)
Real estate is also very wide, I would avoid investing in MF syndication at this time around except if the property purchased has large discount.It's wise to say, most commercial real estate today is not in good shape.
- Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes3yI closed on an out of state SFH about 4 weeks ago, to the horror of my family and non-investor friends. I bought the house from a flipper who overpriced it. I got a decent rate, 6.99% conventional 30 year fixed with low origination fee and points. My financial advisor says that I should not buy anymore properties. Their suggestion is go get a part time job Uber, DoorDash and I’d cash flow the same but the 2nd job has no tax benefits and it doesn’t appreciate in value and you have to continually work hours each day to earn income.
Quote from @Bruce Woodruff:
Quote from @Miles Atkins:
Quote from @Bruce Woodruff:
This is the best (but hardest) time for a newbie to get into RE. This market is scaring away all of the lookie loos who have been buying up anything they could. Now they have to be careful......
Bit new to the market aspect of things. Is this the hardest time to get into real estate because the prices are high?
Prices are (generally) lower around many parts of the country. You can find many 'deals' if you look. The problem for new buyers is that (they think) interest rates are high. They actually are still historically low, quite low, in fact.
- 3yJay ThomasPro MemberReal Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
You need to take advantage of this opportunity. While it may be difficult, this is the best time to invest in real estate as you will gain invaluable experience and knowledge no bull market can teach you. Investing in a recession presents unique challenges which force investors to learn the fundamentals in order to succeed. Don't miss out on this opportunity - get off the fence and make sure you're prepared for what lies ahead! With the right tools and mindset, you'll be well equipped to capitalize on any upturns while also laying a strong foundation during downtimes. With perseverance, you'll come out ahead when all is said and done. So don't wait - take action now!
- 3yTaylor DaschBusiness MemberReal Estate Agent · Temple, TX · Member since 2022 · 1k+ posts · 700 votes
You are a beast Eliott! I agree!
Taylor Dasch | EG Realty560 Reviews - 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Becca F.:
I closed on an out of state SFH about 4 weeks ago, to the horror of my family and non-investor friends. I bought the house from a flipper who overpriced it. I got a decent rate, 6.99% conventional 30 year fixed with low origination fee and points. My financial advisor says that I should not buy anymore properties. Their suggestion is go get a part time job Uber, DoorDash and I’d cash flow the same but the 2nd job has no tax benefits and it doesn’t appreciate in value and you have to continually work hours each day to earn income.Quote from @Bruce Woodruff:
Quote from @Miles Atkins:
Quote from @Bruce Woodruff:
This is the best (but hardest) time for a newbie to get into RE. This market is scaring away all of the lookie loos who have been buying up anything they could. Now they have to be careful......
Bit new to the market aspect of things. Is this the hardest time to get into real estate because the prices are high?
Prices are (generally) lower around many parts of the country. You can find many 'deals' if you look. The problem for new buyers is that (they think) interest rates are high. They actually are still historically low, quite low, in fact.
You can completely ignore your family. friends and financial advisor. They are all idiots (and I'm being kind :-)
Congrats on being smarter than them and getting into RE. As you already know you can create an income stream AND you are gaining equity, which is essentially just stuffing money into your pockets while you do nothing.
Tell them to go do Uber and you refi and buy more properties. Compare notes in 5 years and see what they say then. Losers....
PS - 6.99% is fine. My first house had a 18% rate.... :-) It literally doesn't matter as long as the numbers work.
- Investor · Wheat Ridge, CO · Member since 2013 · 75 posts · 41 votes3y
I heard this phrase on a podcast recently: run down the hall of indifference. How can I think differently than others, defend my position with data, and account for downside? When asset classes and property types that people least care about are the ones that are great wins. For those who are saying commercial real estate is not in good shape, I think now is the right time to underwrite properties within reason.
- 3yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Miles Atkins:
Quote from @V.G Jason:
Quote from @Miles Atkins:
Quote from @Bruce Woodruff:
This is the best (but hardest) time for a newbie to get into RE. This market is scaring away all of the lookie loos who have been buying up anything they could. Now they have to be careful......
Bit new to the market aspect of things. Is this the hardest time to get into real estate because the prices are high?
High is a relative thing.
Most would say rates are high, these are kind of average. I do think rates cannot stay at this level indefinitely due to debt, but if you think we're going back to 3% I would bet against that. 5% ish will be the new norm. If rates went down to 5% today, a lot of these listed houses in good markets would be listed for about an extra $10k-$20k per $100k listed, at least. In really growing markets probably closer to 25k. Do the math on "high" rates and being negative cash flow owning the underlying asset versus that extra increase in outright house price and difference in cash up front. Going for good markets is now more key than ever, you'll get substantially higher cash flow + appreciation if you weather the first couple or so years. Only in '08-'22 were people buying and outright cash flowing, it was a short lived thing. You'll cash flow on a purchase in 2023 in 2025-2027 if you bought in a good area.Thanks for this level of detail. What do you mean when you say "owning the underlying asset versus that extra increase in outright house price and difference in cash up front." ? And is finding good markets and deals all in the analysis?
Do the math.
If you're investing in a city that's steadily growing(say .75%) in annual population, visitors, and industries and the rates are causing prices to flat line at say $300k. What do you think happens when rates go down a percent or two, I'd wager every it'd go up $5-10k per $100k for every percent drop. In some nice(r) areas maybe double that.
So for a $300k house, at 7% & 25% downpayment you're putting down $75k. If the house was at 5%, it'd go for like ~$350k, you're downpayment is $87.5k. That's a $12.5k difference(without including closing costs both sides). If you're OTM @ 7% and say by $300 a month. Do the math, that's 40+ months to break even on "waiting for rates". Own the underlying asset instead. This is obviously not going to work on 75% of properties, but if you're buying in a good area in a good city. Just lock it up.
If you're buying in an average area, where DOM is in the 40-60 try to get a break even type of deal. If you're buying in a below average area, good luck. If you buy in good areas, you'll eat **** years 1-3 maybe even year 4. But the rate of rental raises & appreciation will be quicker. You're evaluating a 30-year structure over a 3-year issue. Granted, you may not hold it for 30 years so realize that too. If you're a buy and hold for 7, 12, 15-20 years then buy quality.
- 3yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
Quote from @Becca F.:
I closed on an out of state SFH about 4 weeks ago, to the horror of my family and non-investor friends. I bought the house from a flipper who overpriced it. I got a decent rate, 6.99% conventional 30 year fixed with low origination fee and points. My financial advisor says that I should not buy anymore properties. Their suggestion is go get a part time job Uber, DoorDash and I’d cash flow the same but the 2nd job has no tax benefits and it doesn’t appreciate in value and you have to continually work hours each day to earn income.Quote from @Bruce Woodruff:
Quote from @Miles Atkins:
Quote from @Bruce Woodruff:
This is the best (but hardest) time for a newbie to get into RE. This market is scaring away all of the lookie loos who have been buying up anything they could. Now they have to be careful......
Bit new to the market aspect of things. Is this the hardest time to get into real estate because the prices are high?
Prices are (generally) lower around many parts of the country. You can find many 'deals' if you look. The problem for new buyers is that (they think) interest rates are high. They actually are still historically low, quite low, in fact.
They're idiots. Pardon my french.
The most important thing with house prices isn't so much the rate as it is the supply. With low rates locked in and re-fi'd, the house scarcity will remain a huge issue to your benefit. Don't waste your time on Uber, Doordash. Just weather the storm of a tough ride for 3-5 years. If you can accept and weather that, you'll be golden. - Rental Property Investor · Hollywood, FL · Member since 2015 · 156 posts · 93 votes3y
Everytime is the best and worst time to get into real estate.
I bought the Carlton Sheets course back when Jesus was a boy. I was living in NYC at the time and made some calls in the newspaper and followed up a bit. I didnt stick with it long enough. I have been investing in Montgomery AL for about 4 years now and have made huge strides by just being persistent. I was thinking the other day that I could have rolled through the Southeast like a hurricane with that course back then. I was scared, did not have enough belief in the process, etc.
People are buying and selling real estate everyday, everywhere on the planet....the only thing changes is the PRICE! I plan to buy/sell/hold/flip/wholesale/Airbnb/whatever until I'm tired of it, good market or bad market. Don't ignore the changes in the market, just adjust to it. Always believe you can do it...very important. There is a time to research, a time to devour information, a time to ask all types of questions, AND there is a time to PULL THE TRIGGER. Once you do ..... oh boy, watch out.
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