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?
Most Popular Reply
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.
47 Replies
My guess is the yes responses here will come from the younger investors here who have not been a part of a full cycle. Hard to believe I am officially an old timer but I have been at this since I was 20. When markets turn south which has not happened yet to the extent it happened in the late 80/early 90s and the late 2000s, of course the number of investors will be whittled down
In many markets prices doubled in 3/4 years. So even if the market has pulled back 10-20%, prices are still up substantially from 4-5 years ago. Am I still buying? Yes because that is what I do. However, I tend to be a contrarian in some aspects and buy what many on BP say not to buy
- What do you not buy that BP says to buy? Negative CF real estate, commercial?
Quote from @Greg H.:
My guess is the yes responses here will come from the younger investors here who have not been a part of a full cycle. Hard to believe I am officially an old timer but I have been at this since I was 20. When markets turn south which has not happened yet to the extent it happened in the late 80/early 90s and the late 2000s, of course the number of investors will be whittled down
In many markets prices doubled in 3/4 years. So even if the market has pulled back 10-20%, prices are still up substantially from 4-5 years ago. Am I still buying? Yes because that is what I do. However, I tend to be a contrarian in some aspects and buy what many on BP say not to buy
- Real Estate Agent · Louisville, KY · Member since 2017 · 1k+ posts · 1k+ 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.
Neither, it is just a time to get into real estate.
- Rental Property Investor · Minneapolis, MN · Member since 2016 · 34 posts · 22 votes3yI think this is the greatest time in the past 15 years to learn about real estate investing. If you're raising capital, it's a great time to educate your investors and prospective investors. Single family is likely going to stay consistent or maybe see a bit of a price dip (of course this is market specific).
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.
Last Friday, I had a tequila with Ken McElroy. He said he's "licking his chops" right now.
When Ken talks, I listen. Quote from @Chris Schwagerl:
I think this is the greatest time in the past 15 years to learn about real estate investing. If you're raising capital, it's a great time to educate your investors and prospective investors. Single family is likely going to stay consistent or maybe see a bit of a price dip (of course this is market specific).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.
Last Friday, I had a tequila with Ken McElroy. He said he's "licking his chops" right now.
When Ken talks, I listen.He's been saying that nonsense forever. Also said foreclosure was right on the horizon into 2021 & 2022 at end of q4 2020. He's totally disconnected from the individual investors around the nation.
- Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes3y
I was laughing so hard at your comments! :-) I have 4 properties and one of them doesn't have a mortgage. I've been very cautious about scaling and pulled equity out of my California rental to buy the recent SFH in Indiana. The way my non-investor friends talked to me, you would have thought I bought 100 properties. They pay much higher federal taxes from their W2 income or stock dividends than I do because my rentals bring my taxable income way down. There is no way to save your way to wealth like I was taught (pay off mortgages, save money in the bank, buy things on sale, use coupons) and I don't want to work at my W2 job until I'm 65 or 70. Two of my investor friends quit/retired early from the full time jobs before the age of 40 so they're my mentors.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Becca F.:
I was laughing so hard at your comments! :-) I have 4 properties and one of them doesn't have a mortgage. I've been very cautious about scaling and pulled equity out of my California rental to buy the recent SFH in Indiana. The way my non-investor friends talked to me, you would have thought I bought 100 properties. They pay much higher federal taxes from their W2 income or stock dividends than I do because my rentals bring my taxable income way down. There is no way to save your way to wealth like I was taught (pay off mortgages, save money in the bank, buy things on sale, use coupons) and I don't want to work at my W2 job until I'm 65 or 70. Two of my investor friends quit/retired early from the full time jobs before the age of 40 so they're my mentors.
I would die quickly if I retire before 40 while having fun job and high 1% top rate income lol
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.
simply put, there are no bad times but there are plenty of bad deals. If you don't do the analysis and homework, you can go broke in any market.
- 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Becca F.:
I was laughing so hard at your comments! :-) I have 4 properties and one of them doesn't have a mortgage. I've been very cautious about scaling and pulled equity out of my California rental to buy the recent SFH in Indiana. The way my non-investor friends talked to me, you would have thought I bought 100 properties. They pay much higher federal taxes from their W2 income or stock dividends than I do because my rentals bring my taxable income way down. There is no way to save your way to wealth like I was taught (pay off mortgages, save money in the bank, buy things on sale, use coupons) and I don't want to work at my W2 job until I'm 65 or 70. Two of my investor friends quit/retired early from the full time jobs before the age of 40 so they're my mentors.
You're being incredibly smart and you already know it... Keep it up!
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes3y
It would be helpful if there were more discussions on real acquisitions (purchased with our own money) than discussions on the market. The numbers will speak for themselves on whether or not it's a good time to buy.
Not sure i agree w the general sentiment on this thread. No one knows where rates are going over the next 24 months. Which means you may be catching a falling knife.
Additionally, prices have not come down in any meaningful way to offset the increase in rates. Rates have doubled, while home prices have barely decreased in most markets.
I see posts from people itching to make their first purchase. But prices, cap rates have barely budged since rates doubled. So, unless rates go down over the next 12 months, it seems inevitable that prices and cap rates will have to. And that any property purchased today will be worth less.- 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Jon A.:
Not sure i agree w the general sentiment on this thread. No one knows where rates are going over the next 24 months. Which means you may be catching a falling knife.
Additionally, prices have not come down in any meaningful way to offset the increase in rates. Rates have doubled, while home prices have barely decreased in most markets.
I see posts from people itching to make their first purchase. But prices, cap rates have barely budged since rates doubled. So, unless rates go down over the next 12 months, it seems inevitable that prices and cap rates will have to. And that any property purchased today will be worth less.True. But yet sometimes ya gotta take a leap of faith. Hold a average performing property until rates go down and/or appreciation kicks in....
- Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes3y
Quote from @Mike Dymski:
It would be helpful if there were more discussions on real acquisitions (purchased with our own money) than discussions on the market. The numbers will speak for themselves on whether or not it's a good time to buy.
Here are my numbers Indianapolis SFH: purchase price $130,000 (bought from a flipper who recently renovated it and negotiated an aggressive offer, wrote 2 offers with one cash, one financed and we met in the middle)
20% down, 30 year conventional with 6.99% fixed rate
Mortgage payment: $859 (PITI)
Projected rent: $1050 to $1100 (property management company will list it at $1100 this week)
This is less than the 1% rule. I couldn't find anything meeting 1% so that's around 0.75% to 0.85%. The Rent to Price Ratio is much worse in the San Francisco Bay Area around 0.54% so wasn't going to buy anymore in California at these prices. I didn't want to do a BRRRR out of state, may consider that for my next purchase now that I have a team in Indianapolis (realtor, contractor, PM company, roofing company).
Water heater and HVAC are about 2 years old, all minor items in inspection report were fixed. Most everything else is brand new, appliances, cabinets, granite countertops, sink, faucet fixtures, flooring, new paint. The windows will eventually need to be replaced in the future.I don't anticipate major capital expenses or repairs in next year or two unless tenant misuses things (e.g. paper towels down the toilet) or breaks things. Area is Class C could be turning to a B. Neighborhood is growing with coffee shops, restaurants etc.
My other properties are Class A - I debated going this route of buying in a better neighborhood or a "hot market" and being in a break even (meaning rent just covers PITI monthly payment) or negative cash flow with high mortgage payment. I'm thinking Nashville, Tennessee or Florida Panhandle (the other two areas I was considering since lots of people are moving to Florida and the appreciation over the last 10 years has been more than Indiana. My other SFH in a nice Indianapolis suburb has appreciated 70% in 10 years). This is sort of speculating that rents will increase and eventually be in positive cash flow and why investors are paying cash in the Bay Area - hoping for that historic California appreciation. Is it ever a good to start being in a negative cash flow in an appreciation market?
I thought this was a good deal. The other option was not buy anything and pay down current mortgages and put my money into a CD earning 3.8% or 4% or buy index funds and some Amazon stock. The deal is done so I can't give the house back lol....Thoughts?
- Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes3y
Quote from @Becca F.:
Quote from @Mike Dymski:
It would be helpful if there were more discussions on real acquisitions (purchased with our own money) than discussions on the market. The numbers will speak for themselves on whether or not it's a good time to buy.
Here are my numbers Indianapolis SFH: purchase price $130,000 (bought from a flipper who recently renovated it and negotiated an aggressive offer, wrote 2 offers with one cash, one financed and we met in the middle)
20% down, 30 year conventional with 6.99% fixed rate
Mortgage payment: $859 (PITI)
Projected rent: $1050 to $1100 (property management company will list it at $1100 this week)
This is less than the 1% rule. I couldn't find anything meeting 1% so that's around 0.75% to 0.85%. The Rent to Price Ratio is much worse in the San Francisco Bay Area around 0.54% so wasn't going to buy anymore in California at these prices. I didn't want to do a BRRRR out of state, may consider that for my next purchase now that I have a team in Indianapolis (realtor, contractor, PM company, roofing company).
Water heater and HVAC are about 2 years old, all minor items in inspection report were fixed. Most everything else is brand new, appliances, cabinets, granite countertops, sink, faucet fixtures, flooring, new paint. The windows will eventually need to be replaced in the future.I don't anticipate major capital expenses or repairs in next year or two unless tenant misuses things (e.g. paper towels down the toilet) or breaks things. Area is Class C could be turning to a B. Neighborhood is growing with coffee shops, restaurants etc.
My other properties are Class A - I debated going this route of buying in a better neighborhood or a "hot market" and being in a break even (meaning rent just covers PITI monthly payment) or negative cash flow with high mortgage payment. I'm thinking Nashville, Tennessee or Florida Panhandle (the other two areas I was considering since lots of people are moving to Florida and the appreciation over the last 10 years has been more than Indiana. My other SFH in a nice Indianapolis suburb has appreciated 70% in 10 years). This is sort of speculating that rents will increase and eventually be in positive cash flow and why investors are paying cash in the Bay Area - hoping for that historic California appreciation. Is it ever a good to start being in a negative cash flow in an appreciation market?
I thought this was a good deal. The other option was not buy anything and pay down current mortgages and put my money into a CD earning 3.8% or 4% or buy index funds and some Amazon stock. The deal is done so I can't give the house back lol....Thoughts?
Perfect, thanks for sharing. $1,100 rent x 93% occupancy = $1,023 net effective rent - $690 P&I = $333 in margin to cover expenses and cap ex reserves (breakeven cash flow is at a 33% expense ratio...$333/$1,023). And then there is principal paydown and potential appreciation.
- Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes3yIs that good? I'm getting used to all this terminology: cash-on-cash return, ROI, NOI, return on equity, etc. I'm a fairly new investor with lots of equity in 2 out of the 4 properties so if it's explained in layperson's terms or like I'm a 5th grader lol, that would be great
Quote from @Mike Dymski:
Quote from @Becca F.:
Quote from @Mike Dymski:
It would be helpful if there were more discussions on real acquisitions (purchased with our own money) than discussions on the market. The numbers will speak for themselves on whether or not it's a good time to buy.
Here are my numbers Indianapolis SFH: purchase price $130,000 (bought from a flipper who recently renovated it and negotiated an aggressive offer, wrote 2 offers with one cash, one financed and we met in the middle)
20% down, 30 year conventional with 6.99% fixed rate
Mortgage payment: $859 (PITI)
Projected rent: $1050 to $1100 (property management company will list it at $1100 this week)
This is less than the 1% rule. I couldn't find anything meeting 1% so that's around 0.75% to 0.85%. The Rent to Price Ratio is much worse in the San Francisco Bay Area around 0.54% so wasn't going to buy anymore in California at these prices. I didn't want to do a BRRRR out of state, may consider that for my next purchase now that I have a team in Indianapolis (realtor, contractor, PM company, roofing company).
Water heater and HVAC are about 2 years old, all minor items in inspection report were fixed. Most everything else is brand new, appliances, cabinets, granite countertops, sink, faucet fixtures, flooring, new paint. The windows will eventually need to be replaced in the future.I don't anticipate major capital expenses or repairs in next year or two unless tenant misuses things (e.g. paper towels down the toilet) or breaks things. Area is Class C could be turning to a B. Neighborhood is growing with coffee shops, restaurants etc.
My other properties are Class A - I debated going this route of buying in a better neighborhood or a "hot market" and being in a break even (meaning rent just covers PITI monthly payment) or negative cash flow with high mortgage payment. I'm thinking Nashville, Tennessee or Florida Panhandle (the other two areas I was considering since lots of people are moving to Florida and the appreciation over the last 10 years has been more than Indiana. My other SFH in a nice Indianapolis suburb has appreciated 70% in 10 years). This is sort of speculating that rents will increase and eventually be in positive cash flow and why investors are paying cash in the Bay Area - hoping for that historic California appreciation. Is it ever a good to start being in a negative cash flow in an appreciation market?
I thought this was a good deal. The other option was not buy anything and pay down current mortgages and put my money into a CD earning 3.8% or 4% or buy index funds and some Amazon stock. The deal is done so I can't give the house back lol....Thoughts?
Perfect, thanks for sharing. $1,100 rent x 93% occupancy = $1,023 net effective rent - $690 P&I = $333 in margin to cover expenses and cap ex reserves (breakeven cash flow is at a 33% expense ratio...$333/$1,023). And then there is principal paydown and potential appreciation.
- Real Estate Broker · Fayetteville NC · Member since 2021 · 55 posts · 26 votes3y
I definitely agree! Getting started in this market is showing me the consistency and grit needed to survive long term as an investor. If I can thrive now then I know I can in any market.
- 3yShawn McenteerBusiness MemberRealtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
Time in the market tends to beat timing the market
House Hacking New Jersey563 Reviews - Real Estate Agent · Columbus, OH · Member since 2023 · 161 posts · 217 votes3y
Quote from @Ray Hage:
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.
simply put, there are no bad times but there are plenty of bad deals. If you don't do the analysis and homework, you can go broke in any market.
This is very true! Regardless of a market's condition, there will be good deals out there. If you are struggling to find good deals in one city, try the next. Depending on your strategy and goals, in my opinion, it is a good time to invest in central Ohio. Connect with me if you would like to explore Columbus!
- House Hacking Specialist · Denver, CO · Member since 2016 · 411 posts · 396 votes3y
3 best time to get in REI:
1. 5 years ago
2. yesterday
3. tomorrow!
- 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Ben Einspahr:
3 best time to get in REI:
1. 5 years ago
2. yesterday
3. tomorrow!
I would say 30 years ago/yesterday/tomorrow :-)
- House Hacking Specialist · Denver, CO · Member since 2016 · 411 posts · 396 votes3y
Quote from @Bruce Woodruff:
Quote from @Ben Einspahr:
3 best time to get in REI:
1. 5 years ago
2. yesterday
3. tomorrow!
I would say 30 years ago/yesterday/tomorrow :-)
touche
- 3yJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
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.
Best time to buy real estate was yesterday! Time in the market always beats timing the market - if the #s work, just buy
Jimmy Lieu, Red 1 Realty4.9121 Reviews
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