I want to wait for the next buying opportunity

CA · Member since 2016 · 1k+ posts · 1k+ votes

I am thinking I won't have to wait for more than 1-2 years... Your thoughts?

Most of my coworkers, especially those in the early 30s, have bought and have a mortgage that is $10K in monthly PITI... Tough.....

Any job loss would wipe them out, or even without a job loss, it is very heavy on the financials and leave them no room to save for retirement, or kids college...

I just dont see how it is all sustainable... Maybe I am the pessimistic...

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Russell BrazilBusiness Member

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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

Havnt you been saying this since you joined the site 2 years ago?

[email protected]301-893-4635 Podcast Guest on Show #192

District Invest Group545 Reviews

Website View Page

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Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
8y
Some are predicting a downturn and others are not. There is one certainty...one group will be right.
37 Reply
Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
8y
I have a few specific sellers I am waiting to get off the fence and retire, but I am generally in agreement with you @Diane G.
I refuse to pay these crazy prices and chase skinny deals. I'm selling my smalls easily by owner as they become vacant. Got tired of waiting and started investing some of my opportunity fund/dry powder into some specific stocks as they meet my price targets.
Gotta roll with what the market gives us - or doesn't!
5 Reply
Grant Rothenburger
Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes
8y
@Diane G. Sounds like a smart idea.
0 Reply
Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
8y
Havnt you been saying this since you joined the site 2 years ago?
[email protected]301-893-4635 Podcast Guest on Show #192
District Invest Group545 Reviews
Website View Page
68 Reply
Jeffrey Holst
Investor · Chattanooga, TN · Member since 2016 · 676 posts · 543 votes
8y
@Diane G. I think @Russell Brazil makes a great point waiting is often an excuse. I 100% agree that you should not chase deals that arent there but there are deals in every market. My strategy is to only buy cash flow positive properties that if/when the market moves they still pay for themselves. I also try really hard to make sure that I have a safety margin in the cash flow. By way of example. I recently bought a duplex fixed it up pull back the equity and have a payment of about 500 bucks on it. rents are around 700 a side, taxes and insurance hit me for 2K a year with all expenses and management costs it cash flows about 400-500 bucks a month. I dont see rents going down 30% in the next ever so I fell like this deal will always be ok if equity drops and I am upside down Ill keep it rented and pay the payment and wait it out. eventually it will be paid for and still rented out. On the other hand if it goes up in value I might sell and roll the money to a new deal either way I win. Cash on cash return is around 30% in the meantime.
Not saying dont wait just saying be careful not to wait just to wait.
15 Reply
Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
Diane G. Have you ever watched the movie the big short? That explains what caused the crisis. It took nearly 40 years for all the events to lead up to that. That was a once in a life time event. The next correction won’t be nearly as prevelant. My family who works in finance predicts a 10 percent correction sometime before 2020. That’s nothing compared to the 40 percent drop during the last crisis
16 Reply
Matt K.
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
8y
I feel similar kind of way locally, I get there's money here... but people are going all in based on emotion. I've seen first hand people drain savings account to chase their dream house..... and by drain I mean ALL OF IT, every last cent. I've also seen people go all in and max out the budget for a 1 bd condo.... and these are the types that are paycheck to paycheck.
But who knows, maybe I'm the idiot for not going all in now.
1 Reply
Matt K.
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
8y
Originally posted by @Caleb Heimsoth:

Diane G. Have you ever watched the movie the big short? That explains what caused the crisis. It took nearly 40 years for all the events to lead up to that. That was a once in a life time event. The next correction won’t be nearly as prevelant.
My family who works in finance predicts a 10 percent correction sometime before 2020. That’s nothing compared to the 40 percent drop during the last crisis
When you're talking nearly a million dollars and people having what maybe like 5-15% equity a 10% correction is going to hurt. Couple that w/ the stress of living beyond your means or the stress of paycheck to paycheck I wonder how that's going to effect ones motivation to keep paying.
0 Reply
Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
8y
Right now could be the buying opportunity and you dont realize it .
13 Reply
Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
8y
That is the challenge with investing in cyclical markets or appreciation plays (I have some)...it's inherent in the strategy. You are either in it for the long haul and ride the waves or you get out when the market is ripe. It's not about feelings such as pessimism or optimism, it's about market knowledge, math, and a strategy.
I am selling a few market appreciation plays and reinvesting the funds in properties with a higher expected IRR going forward. We can all pivot or sit tight based on our individual markets, opportunities, strategies, and goals.
4 Reply
Eric James
Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
8y
Personally I doubt if the CA RE market is going to take a downturn. However, if conditions get so bad as to lead to a downturn I would have doubts if there would be any recovery on the horizon. I would go ahead and buy there now or look out of state. I wouldnt wait to buy in CA.
0 Reply
Casity Kao
Realtor · Grand Rapids, MI · Member since 2016 · 174 posts · 122 votes
8y
@Diane G. Your coworkers seem to be buying houses. Investment real estate is a whole different ball game. If you can buy under market 10-20%, especially with something that can produce income or at least a monthly housing expense. In California that is likely however, so you can invest out of state in a more affordable area. Being from California myself I can tell you that if you can invest in an area where it as a break even to rent or close you absolutely should if it has the fundamentals to appreciate. I definitely know you can make it work if you want it to, but if you don't want to do a live in flip, have roommates, convert a single into a multi, AirBNB or anything then you are out of luck. Also if you lose your job and you don't pay rent then you are out of your home in 2 months. If you have a mortgage you are out of housing in 6-12 months, so if just depends on how you look at the worst case scenario.
6 Reply
Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
8y
Well... a couple things...
I'm guessing your coworkers who have PITI upwards of $10k are buying locally near you in Sunnyvale, or anywhere around that area. And are these houses they are living in or investment properties?
You can absolutely buy an investment property that has good cash flow to not only cover all of the expenses but also to leave some extra in your pocket each month. They aren't likely going to be in Sunnyvale, or anywhere in CA, but they exist. I live in LA and only buy investments out-of-state for this exact reason.
It's not that you are being pessimistic... if those are the only numbers you're seeing, you're actually being smart to hesitate. But those aren't the only options out there by any means. There are lots of ways to mitigate the risk of job loss and all that, but it's all in the numbers.
Happy to chat anytime if you want to know more or ask questions!
4 Reply
Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
8y
Oh whoops...one more comment...if you wait for a "crash", or whatever else might constitute a buying opportunity, you could be waiting a while. There's really no way to know anything about the time frame on that.
4 Reply
Sam Shueh
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
8y
You need to read my blog on 2018 SFBA Prediction a month ago.
All the best,
Sam Shueh
0 Reply
David S.
Investor · Bay Area, CA · Member since 2014 · 165 posts · 45 votes
8y
I agree. We are already seeing softening in rents and purchase offers in San Francisco….But I am not expecting more than a 5-10% correction in prices in the SF Bay area over the next couple of years. Under this scenario, one should not be in a rush to buy. On the other hand, in hindsight, if one had the financial wherewithal to buy 2 or 3 years ago, they should have taken it rather than waiting.
By the way, @Diane G., would you mind sharing what your investment criteria are from a cash flow return on investment point of view for Bay area real estate?
0 Reply
Tyler Kastelberg
Real Estate Technology · San Francisco, CA · Member since 2016 · 262 posts · 265 votes
8y
@Diane G.
Diane: You're wise to hesitate as real estate prices have skyrocketed past historic highs in SF.
However, I don't predict a material, near-term withdraw in real estate prices for two reasons:
1) The amount of debt as proportion of asset value on California real estate is at historic lows when compared to prior market expansions
2) The number of trustee sales as a percentage of total real estate sales is very low. An increase in this percentage is a leading indicator of a future retraction in the market
The more likely result of this rapid expansion will be an extended "cooling off" period, where real estate prices hover around their current levels for a few years.
@David S.
David: I'd like to learn more about the softening that you're seeing in the SF market. I've noticed multifamily inventory has been growing in the City. Do you see pockets of value in the City?
4 Reply
Dylan VargasPro Member
Rental Property Investor · Chico, CA · Member since 2016 · 625 posts · 336 votes
8y
@Diane G. I think you past lessons form Phoenix and San Francisco are why you think the way you do. I would do the exact same and think you are correct. I do believe there are still deals in the Bay Area and Northern California in general but ......something does have to give at some point.
1 Reply
Sam Josh
Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
8y
There WILL be a downturn. We just don't know WHEN. Plus hard to predict how LONG and how DEEP. There may be a downturn and prices may fall but not enough. Or everything might come crashing down and most buyers including the ones waiting for the downturn might not have the stomach to buy.
1 Reply
Rachael A. Tanner
Bay Area · Member since 2016 · 42 posts · 11 votes
8y
My partner (boyfriend) and I decided to buy our condo because we didn't want to pay crazy amount in rent in the city. That said, we have a 2 bed, 2 bath and have roommates. We are ok with that lifestyle; everyone is not. That leaves us paying as much in for our mortgage as we were for rent. (PITI+ HOA+water/trash/gas is a about $4800K/month; our previous rent was $2300 a month)
That said, it all depends on what you want. We don't mind living a little out-of-the-way. We don't mind roommates. And we feel our area will appreciate in value as there are entitled developments underway.
If you want a single family home with a backyard that is already in pristine condition, you might get taken for a ride right now.
From what I have read and listened to, the economy is strong, and many predict a strong year in 2018 and then a correction in 2019 or even as far our as 2020.
1 Reply
Steven Gesis
Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes
8y
Originally posted by @Diane G.:

I am thinking I won't have to wait for more than 1-2 years... Your thoughts?
Most of my coworkers, especially those in the early 30s, have bought and have a mortgage that is $10K in monthly PITI... Tough.....
Any job loss would wipe them out, or even without a job loss, it is very heavy on the financials and leave them no room to save for retirement, or kids college...
I just dont see how it is all sustainable... Maybe I am the pessimistic...
Always deals in the marketplace, you should begin when you feel you are comfortable and are prepared to take a risk
0 Reply
Diane G.
OP
CA · Member since 2016 · 1k+ posts · 1k+ votes
8y
Funny when I read all the posts (thank you all for your inputs), everyone agrees that marketing is heading lower, even though there is uncertainty in terms of exact timing and severity.... This really reminded me a convo I had with my boss about 10 years ago... Back in 2007 ish time, I was an finance analyst at a high tech company... one day I was chatting with My then CFO, and I asked him whether he thought the economy is going up or down, becasue there were so many conflicting views out there... And this is what I could never forget ... he relied : Diane. As long as there’s enough people think we are going into recession, we are going into a recession... nothing else matters.... sure enough, we all know what happened in 2008/2009... I am thinking we are back at that stage again. 10 years later
1 Reply
Paul Palo
Los Angeles, CA · Member since 2017 · 9 posts · 3 votes
8y
Case Schiller is at its highest point in history. You can find rehab projects that offer value but be prepared to put in work. You are not wrong for waiting it out but you never know when that's going to happen.
1 Reply
Terry Lao
Professional · Anaheim, CA · Member since 2017 · 1k+ posts · 686 votes
8y
@Diane G.
Zillow's forecast for 2018 lists San Jose as #1. The year over year gain for 2017, for San Jose was 17%. With that said, the goal of 8.9% median price growth is within reason. Your decision to wait and wait for two years will back fire if you wait 2-3 years, all the while increase a total of 20%, then fallback 10%.
Terry
http://www.tri-cityherald.com/news/nation-world/na...
9 Reply
Demetrius Davis
Rental Property Investor · Chicago, IL · Member since 2016 · 98 posts · 52 votes
8y
When measuring whether a market is too hot or prices appreciating at an unsustainable rate, I look at wages. If wages are increasing at a similar rate and pace, the appreciation is sustainable. However, if wages are flat or growing slowly, the appreciation is likely illegitimate and there will be a softening or correction.
If people in your market are already spending 45-50% of their income on housing, don't expect that in 2 years, they'll be able to spend 55-60% on housing. Wages must grow in order for prices to continue to grow.
Additionally, consider that rising interest rates and property taxes will impact affordability.
3 Reply

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