Invest now or wait to see if market tanks?

93 Replies

I sold my duplex and I’m sitting on a pile of cash. Moving forward I will implement the BRRRR strategy to get up to 10 properties, recycling as much capital as possible. I’m excited to move forward in my REI career, but also apprehensive because it seems the market may be headed down. I don’t want to buy before a crash and sabotage the refinance. Should I wait?
@Jonathan Hulen Be picky and only buy anything 20 percemt below market that cashflows well. I'd also stay asay from small markets that are not job diverse if market crash but if you can't find anything I'd wait and strenghten your position for a crash. We are waiting but I had an opportunity to buy a 8 plex for 330k with 8000 gross rents. Yeah, not walking away from that.

Markets go up and markets come down. Buy a property if it makes sense, don't spend too much time gazing into the crystal ball of what may happen in the market .

If you have the cash to buy 10+ more properties then buy them slowly and make sure you stick to your numbers. Then you will likely the the benefit from dollar cost averaging. 

Keep in mind, everyone has been waiting for the collapse of the real estate market for at least the last 5-7 years. And just because the stock market is hitting a correction does not mean we are about to fall off the cliff of depression/recession again.

If you’re worried about a future downturn in the market, you may want to consider investing in an area of the country that doesn’t typically experience large swings in market value during economic downturns. 

Originally posted by @Ran L. :

I would definitely not sell my properties at 20% below the market price to a buyer.  

I wonder who would want to sell it 20% below the market price.  

 properties below market usually mean they are fixers at some level.. or in markets were you have Faux valuations.. IE appraisals can come in high but cash buyers will never pay appraised value there for there is only equity to the lender in reality the value is what someone pays for it.. 

C class and lower trades under market so so called market commonly.. along with sellers who just dont know what they dont know and some wholesaler talks them into selling for under market..

I keep hearing about this market crash?

When is it scheduled?  How bad will it be?

The next event will look nothing like the last one.  

The greatest risk I see is a number of the EU countries are bankrupt, Turkey, Italy, etc.

Should we see an event, liquidity will dry up.  If you have Scrooge McDuck piles of cash, you will be able to buy some properties cheap.  However, if are you dependent on w2 income or other investments or know someone who is, they will be suffering. 

My advice, buy smart and keep moving forward.  There is nothing wrong with planning for the future, but to wait for a single event, you may spot on or you could be waiting a long time to make a move.   

  

@Russell Brazil I suppose “tanks” is a strong word. I’m worried that I’m catching the market in a downturn, and that will effect my refinance after the 6 month period. I don’t think we are going to see another 08.
@Kent Hall Thanks for the advice. I know if I try to time the market I could be sitting on the sidelines for years, and I’m not going to do that. I’m not getting any younger I need to keep moving forward. Having cash will give me larger margins because I won’t have the added costs of a hard money loan.

@Charles Kao Wow, that's amazing! My son and had to pay $650,000 for a 8 plex, and it was a fix needing $75,000 to rehab units to get our rents to $8500! I would love to be in your market. And, BTW, this property appraised for $800,000 the way it sat with only $5000 in gross rents and units in bad condition. So, well done! our 8 plex is in Forest Grove which is a superb of Portland, Or.

Originally posted by @Kyle Schlosser :
@Charles Kao Where was that 8 plex? Solid potential numbers 👍

I would to know too! We are currently in contract for an two 4-units in adjacent lots for $320K that grosses $4200/month.

Big difference between a crash and a correction. While many are predicting a correction, not many are expecting a flat our crash. I would suggest buying conservatively and focusing on cash-flow assets where you can force appreciation.

If you try to time the market, you may run into other issues such as higher interest rates and stricter lending terms. 

I think there are good deals to be had in any market, however, we have had a 10 year bull market in housing, and it seems like the multi-decade bull market in the bond market (where interest rates have continued to fall) may also now be over.

To me, this is the time to be selective about deals, not to stretch to make a deal work.  Depending on your situation, it may be wise to stockpile more cash.  If you are using any loans besides fully amortizing, 30 year loans, you should watch the maturity dates.  If you had a performing loan that matured and needed to be refinanced a month or two after Lehman fell, you might have been in trouble, even if you never missed a payment.

First crash was obviously coming for years based on two things. The crazy loans and free money combined with the expectation that the move from single income households to dual income households was a trend as opposed as a one time event. 

We still have had a period of cheap money, but the loans have been less out of control, however much of the appreciation in certain markets have come from investors. A combination of foreign cash investors and the growth of things like biggerpockets have increased the demand artificially. If that is the case in your market it is more of a traditional pyramid scheme in that once that foreign money runs out or the local investors tie up their capital, or the prices get too high where cash flow markets stop working (looking at you Cleveland), than at that point the demand drops. If you buy at this high point and the driving factor was investors, if the investors stop coming you may see a stubborn market that corrects or even crashes.

I do think many markets are bloated and have been for some time. Others are more protected. But there does seem to be a commonality of outside money in those markets (be it foreign purchase, relocations, or investors such as us). 

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