Liquidating due to Market Correction?

4 Replies

Over the past 3 weeks I have gotten 5 Lead phone calls from different investors asking if I would be interested in some of their property because they are liquidating due to a "feeling" the market is going to change/correct? 

Just wanted to get the opinion of BP on this and see if it is just a coincidence or there is some truth to this?

From my research I believe that we still have some time before a down cycle. It is very dependent upon your local area but on the whole I don't see it happening anytime soon. Funny that they told you that they are selling because of that. Not the best way to sell a deal - seems strange to say that.

If you are a buy and hold investor they markets cycles don't make any difference. You just need to know about the ups and downs when you buy and sell, nothing in between.

You are in New York. Clients I have are selling there for 3 caps as well as in California and doing a 1031 to other states.

Those appreciation only type markets have wild swings in values. They are the first to rise and the first to fall.

In commercial I am still landing 8 plus cap rates. At 3 caps there is nowhere to go but up. At 8 caps plus there is room in the marketplace to go a few more years for good deals and long term debt to lock up. A full cycle happens about every 10 years at various times in different asset classes. With long term fixed debt you can ride out until the next cycle to make a move. That is one reason I do not like short term debt plays with loan due in 3 to 5 years. Those only make sense to me if you have a value add and are exiting before the balloon is due.  

Originally posted by @Adam Bartomeo :

From my research I believe that we still have some time before a down cycle. It is very dependent upon your local area but on the whole I don't see it happening anytime soon. Funny that they told you that they are selling because of that. Not the best way to sell a deal - seems strange to say that.

If you are a buy and hold investor they markets cycles don't make any difference. You just need to know about the ups and downs when you buy and sell, nothing in between.

 Do you think the caller meant stock market correction?  They want their cash to jump in when the Dow corrects?

Does seem strange tho.

@Daniel Sisto ,

A lot of folks are mistaking the current price run up as a new "bubble" when it's little more than the result of supply vs. demand: home building all but stopped in crash and is taking time to recover. Meanwhile, stagnant wages and the difficult lending environment are about the only things keeping a lid on the increase in home prices. If lending could keep pace with the demand, you'd see home prices launch into interstellar space.

Still, if they're bailing out, buy what ever they will sell you at the lowest price you can get.

Tight-fisted lending will continue to support the rental market for the reasonably foreseeable future, IMHO.

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