Timing for Property Purchases

4 Replies

Do any of you feel that waiting until the market starts to come down is a much more effective approach for those looking to purchase their first deal? Or would you recommend that now is still a good time to get started. 

@Calvin Ozanick You'll get about 359 different perspectives on this and it's one of those 'weekly topics' that comes up in the forums.  You'll hear everything from "it's overinflated!" to "don't try and time to market!" to "it's dropping at least 10% in the next year!"  And, by the way, you'll hear all of things every single week, month, year, until there is a crash.  But what if it isn't a crash?  What if it's a pause?  What if it's a correction in 2 years that brings you have to 2016 levels?  The bottom line is that nobody knows and what happens to me in San Diego won't be the same thing as what happens in Whitewater, Wisconsin. 

Some of this also depends on your plan.  If you're buy-and-hold and can afford to ride out any downturn, well, just start now.  It's as good a time as any.  If you're going to buy, rehab, and flip a property in 3-6 months.  Well, might as well start now because it's unlikely the market will faceplant in 6 months.  Now if you were a developer looking to do a ground-up project and it would take you 5 years to have units sale-ready...well...that might be a different situation.  

@Andrew Johnson

Thank you for being so detailed. I am not, per say, apprehensive, but any investor wants to keep profit margins high. I am facing the dilemma in the fact that I wonder if starting now outweighs my patience and coming in to swoop up multiple properties when the time is right. I want to buy and hold and create a passive cash flow. It also makes it easier because of me working for a management company and I can bring the properties I bring in under that umbrella. I am currently leaning towards preparing for the future for a bit longer still and if it does not fall, then I am just more prepared. 

I’d vote for the ‘there’s no time like the present’.

I can’t imagine next year being any more certain or the year after that. Just go ahead and start investing always understanding that the market will change.

If it goes up, great. If it goes down, make sure you’re positioned to handle it. If the zombie apocalypse happens, we’re all pretty SOL anyway. Just make sure you can handle the normal ups and downs with whatever investment strategy and level you get into.

@Calvin Ozanick The issue will always be “when to swoop”. There are plenty of people that are “waiting for a 10% pullback” — or so they say. I have a sneaking suspicion that if the market dropped 10% then wait another *another* 10% pullback because...”See! I told you the market would drop 10% and it won’t stop here!” There’s also this assumption that interest rates will be the same, access to capital will be just as easy, etc. Bank loan committees will get tighter and do you think a HML is going to charge the same interest rates when home prices are declining? I doubt it. But I’m not an HML so I wouldn’t know.

So what happens if at a time when property prices have just dropped 10% if a bank now wants 30% down? If an HML wants more points on their loan? If the market dropped because the fed raised interest rates to 7%? And if the real estate market crashed because of economic weakness, are you still going to have that stable job to allow you to qualify for a loan?

The bottom line is that (for the most part) swings in the market aren’t isolated and independent of other variables.

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