When is the right time to get in?

77 Replies

I contacted one of my mentors after not talking for almost year while I built up some capital. Which a year ago he told me I needed to save more before I jumped into real estate. When I talked to him today he advised me that the market is elevated right now and in his opinion it isn't the best time to buy right now.

So my question is, When is the right time to buy?

I figured real estate was just like the stock market, you never know if the market is completely elevated or if it will continue to rise. Someone new to investing would miss out on a good opportunity if the market were to continue to grow. Or there is the disappointment when your mentor is right and the market drops and your property depreciates in value.

Should I listen to my mentor when it comes to waiting to buy or go ahead and dive in and learn from my mistakes or prosper if the market goes up? Regardless my mentor said he will be by my side. 

You should buy when you think it is the right time to buy.  As cliche as that sounds.

Just because one person is selling doom and gloom doesn't mean that it is actually happening.  If you can find a property that makes sense then I don't see why not.  In the short term, use the time to analyze a TON of deals.  Figure out what to look for from a listing.  Figure out what criteria you want to use to sort through options.  And if something meets your criteria, then pull the trigger.  If it doesn't then have patience.  But keep analyzing.  You never know when a deal will pop up that is the perfect opportunity.

It also depends a lot on what your plan is.  If it's a buy and hold, then you have much more leeway with when to buy.  If it's flipping, then market becomes much more important.

I'm a buy and hold investor, so even if the price of my unit goes down, I'm not looking for a quick exit.  I can handle market fluctuation because that just means more people looking to rent.

Trying to time the market is impossible, if you pick a good property in an area with good desirability and growth you should be fine especially with rentals.  If the economy goes down some people aren't able to buy, meaning that they will have to rent.  In the recession in California most rents stayed flat even though prices went down.  This means that unless you plan on selling in the immediate future price fluctuations shouldn't make a difference.

@Chandler Smith The markets have been elevated for, what, 3+ years now?  I've heard the drumbeat of "overpriced" for at least that long.  And that's fine, it might be right, you never know what the next correction will hold.  The larger fallacy is that people assume post-next-correction (next week or 5 year from now) that interest rates, access to capital, loan requirements, etc. will all be identical to where they are today.  Anyone who lived through the last crash knows that underwriting got a lot more stringent at the bottom.  So all of those lovely loan amounts you prequal for today so easily might not be there down the road.  So my basic answer is: "there's no free lunch".  And if there is a bargain priced lunch you won't know it until 5-10 years later.  Hindsight makes everyone who bought in 2010 a genius but back in those olden' days nobody knew if the market would take 2 years to recover or 10 years.  

I think there are couple things to consider. First, if the deals fits your criteria for investing then I would say its a go. Second, is location and demand. I know personally in Florida due to Irma we have a number of deals that are on hold. They all require re-inspections as well as all clear from FEMA before we can fund these deals. Here in Colorado we are seeing a slight month over month pull back of 3% in average single family homes prices. But is still 8% higher year over year. Interest rates should stay where they are through November/December which bodes well for buyers and affordability.

[email protected] | 303‑872‑9021 | https://www.denverpurhcaseloans.com | CO Lender # LMB100017037

I am mostly look to buy and hold multi-family properties to rent out. I am still new to analyzing deals and have used up all my freebies on the BP calculator so I am still having trouble finding out if the property is a good deal or not other than looking at nearby comps. I'm a bit overwhelmed right now.

It takes a lot of money up front to make a little or none ea month and the costs of doing business are high. If you over extend yourself to get into a investment a "minor" repair could cause you to lose it all, rather you wait and build up your capital you'd be ok.

I'd hate to lose a house and my down payment due to something stupid like extended vacancy or new roof.

Absolutely Matt. For that reason I have cash reserves for unexpected expenses.

My mentor actually told me the same thing. "The market is high now."

Then he told me I need to get into house hacking. Listen to your mentor, especially If you feel he is looking out for your best interest. Speak to him and ask how he notices. What are some clues. You waited one year to save up what's a couple of months?

@Nicolas Conca Thank you atleast I'm not the only one. House hacking is my first goal. I have to wait a few months anyways. Currently selling my truck to get some of the equity out of it so I have more money for a downpayment or for reserves.

Brother same boat. My debt to income is to high. Im about to use turo to rent out my lease. Also paying off my credit cards so I can dump the rest into savings.

@Nicolas Conca Have you ever thought about transferring your credit card debt to another credit card offering 0% interest for anywhere from 6-14 months. Some even give you a $0 balance transfer fee. That way you can pay off your debt faster by not paying that crazy interest.

Yup sure have. I have only one at the moment. My credit is to low to refinance one again through credit karma. At this point it comes down to just minimizing expenses and smarter choices. But thank you that's a good one most folks don't know. 

I even did the refinance (might be a diff term) for the credit card. I had the percentage lowered and then reimburse the diff. That one you can do every 6 months to a year.

I bought one last year. I bought one the year before. I bought 2 houses this year, and I might buy a 3rd this year.

People ask this question all the time. 3 years ago they said the market was too high, today they say the market is too high. When the crash comes they will say the market is too volatile and you should wait to invest.

You want to make money, get in the market. You want to watch the market go by, keep doing what you're doing. 

@Nicolas Conca My mentors bought their first house off of credit cards and they told me as soon as the introductory period was about to end on the 0% interest credit card they would do another balance transfer to another 0%interest card.

But if your credit is too low then yeah your only option is to track your spending and make a budget. Maybe try using the app mint to help you track your spending. 

Personally when I got my credit score up to an 800 shredded all of my cards except one. I only use it for certain bills and gas. Then I give myself a weekly allowance out of the ATM. I shoot for 50% monthly income to save.

@Alexander Felice

I'm working on it buddy just have to find a good deal.

Now may I ask what strategy do you use? Buy and hold? Flip?

That's great. Mint? Never heard of it. That's really good advice. I'll take you up on it. The credit card tactic is good. My question is doesn't it lower your credit to max out the cards to buy a house?

Sincerely,

Nico

@Nicolas Conca Yes it can lower your score if you max it out. Especially if you don't make atleast the minimum payment. Also you lose some points for going over the 30% credit usage threshold. The credit bureau doesn't like to see you using too much credit so you get docked some points for over using credit. Also when it comes to the balance transfer on credit cards that you took a cash advance out for most cards only let you take an advance on 40% of the credit line. So if you transfer your debt to another card make sure the credit line is large enough to carry over your whole debt. Regardless your credit will go up when you pay off your debt and will continue to go up as you stick to a budget and don't use over 3% of your credit line.

Originally posted by @Chandler Smith :

I contacted one of my mentors after not talking for almost year while I built up some capital. Which a year ago he told me I needed to save more before I jumped into real estate. When I talked to him today he advised me that the market is elevated right now and in his opinion it isn't the best time to buy right now.

So my question is, When is the right time to buy?

I figured real estate was just like the stock market, you never know if the market is completely elevated or if it will continue to rise. Someone new to investing would miss out on a good opportunity if the market were to continue to grow. Or there is the disappointment when your mentor is right and the market drops and your property depreciates in value.

Should I listen to my mentor when it comes to waiting to buy or go ahead and dive in and learn from my mistakes or prosper if the market goes up? Regardless my mentor said he will be by my side. 

 Have you thought about flipping to build up your money a bit more?

@Michael Plante

Yes I have thought about that option. My father has been in the remodeling industry for over 10 years so we can do the rehab. In that option I was looking at doing an FHA and using the house as a primary residence for a year or so while we do the rehab and then flip it. If all works out we might do a few. My dad is looking at getting into real estate investing also so there is a possible partnership that may come in the mix. A little scared to mix family with business though.

lots of good advice here, my 2 cents is anytime a deal works! 

But what if the day you buy, housing drops 20%. On 200k house that is 40k, which sucks but how much money are you not making from rent and principal paydown? My point, not being in the market costs you as well.

Originally posted by @Chandler Smith :

@Michael Plante

Yes I have thought about that option. My father has been in the remodeling industry for over 10 years so we can do the rehab. In that option I was looking at doing an FHA and using the house as a primary residence for a year or so while we do the rehab and then flip it. If all works out we might do a few. My dad is looking at getting into real estate investing also so there is a possible partnership that may come in the mix. A little scared to mix family with business though.

 I think you are very smart to be careful about mixing business and family 

I used to live in Polk city went to Lakeland often.   Now live in Deland and flip.  

A few months back I saw a few places I thought could potentially make good flips in Polk county, but they were too far away and found some closer  

If you need some input/help just let me know

@Will Grabert I agree that I need to jump in. The longer your not in the game the less time you have to make progress.

@Michael Plante I didn't realize how close you were to lakeland. My problem right now is not having access to the MLS so my exposure to deals are very limited. Also I've been so focused on looking at multi-family properties and being a landlord that I forgot to look at possible flip options.

Your mentor is right. Now is a very BAD time for new investors to get into the market.

In 2009, very few people are excited about REI. That is a golden opportunity to get in.

Right now, you see how many new investors with small amount of capital wants to get into REI, through OOS TK. This is over exuberance.

Specifically, 2017 RE prices all over the globe are approaching peaks or near peaks. Some kind of correction will come sooner or later. Therefore, the risk is higher now. Unless you are buying your own residence, otherwise, its a risky endeavor to force yourself to jump in right now for new investors. Experienced REI may still find deals though.

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