Anyone slowing down on purchases due to a possible correction?
Most Popular Reply
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7yTime is the greatest ally of the buy and hold investor. Time erases all mistakes. Even if you bought at the height of the market, and held on, You would have paid that mortgage down for 10-12 years by now. You only lose money if you sell.
Since WW2, prices have only dropped twice on a national level, and only the one from a decade ago was a significant amount.
Now if your market is more cyclical like Phoenix or San Francisco, then maybe you proceed with caution...but many markets are not cyclical. They go up, then flatten, then go up, then flatten.
And one of the great things about the last housing collapse.....so many home owners became renters, so rentals had strong demand. Rents skyrocketed in a ton of markets with the housing collapse.
District Invest Group545 Reviews
52 Replies
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Dave G.:
I have the funding and am ready to pull the trigger, but have not bought anything in 2018 yet. Having a hard time finding deals where the #s work.
I'm will go against the grain with most folks and say you can time the market to some degree. I'm not a young person and have seen multiple real estate cycles over the past 40 years. As @Russell Brazil pointed out, if you're in certain parts of the country the cycles are more extreme and can be (admittedly imprecisely) played. My wife and I saw the lunacy in 2004-2006 and sat on the sidelines. We started buying in 2009 with acquisitions nearly ever year since.
Our we in 2008 again? I don't think so for many reasons already pointed out in this thread. Labor supply constraints in the trades is also a big limiting factor to the overbuilding 10 years ago that contributed to the collapse.
So I am still bullish, but will only buy when the numbers work.
and construction lenders pre 08 would give a builder 50 construction loans all based on ARV and builders had zero skin in the game ..
so its bank constraints along with labor..
- 7yDarren MesibovPro MemberMember since 2017 · 38 posts · 7 votes@Will M. Yes, you are correct that it’s likely that you could loose equity by buying near the top of the cycle, however if you are a buy and hold investor you don’t necessarily need to realize said loss by selling at or near the bottom. I cant speak to your situation, but for my investment strategy it makes more sense to focus on cash flowing properties In steady growth markets for this reason, and even more so during times such as these. Furthermore, by focusing on cash flow you can better position yourself to withstand a correction. In the end, after you have made your money, appreciation is just the icing on the cake.
- Rental Property Investor · Salem, OR · Member since 2017 · 696 posts · 660 votes7y
I have more than doubled the number of units this year and will try to do the same next year. If you are in an area with favorable demographic trends (% moving in vs % leaving) and barriers to additional capacity (I am in the greater Portland metro market) combined with very cheap debt if you can get it, and the plan is a non transactional purchase (i.e. buy and hold) then I think that in 10 years I will be looking back wish I had bought more even if there is a rollercoaster in the middle. The question you ask has been asked probably ever since the bottom of 2008 correction and every year since. Buy smart, do not over leverage, spend the time looking for deals that do work even if they require more effort. Rents in a lot of markets went UP as prices went down, and if you are after the rents and do not plan to sell then who cares what the "value" is.
- Flipper · Fort Myers, FL · Member since 2017 · 182 posts · 98 votes7yI am still buying like crazy regardless. Just becareful when u buy. I typically paying 70% or less of what a property is worth when I buy. And I don't think this time will drop more than 30%. I will be fine even if the market corrected tomorrow . And I am flipping the low end property. So worse case I can still rent it out for a decent cash flow
- Real Estate Agent · Las Vegas, NV · Member since 2018 · 17 posts · 9 votes7y@Will M. I sell real estate in Las Vegas and while we are seeing a little bit of a slow down these last couple of months in the over 300k price point, I don't think we are at the top of the market and we are still lower than 2006 prices. So many projects are projected for completion in 2020 including the Raiders stadium and now rumors of an MLB stadium where Rio is...I think it will be at least 2 or 3 years before the market stabilizes. https://www.reviewjournal.com/business/casinos-gaming/6-major-projects-could-reshape-las-vegas-strip-skyline-by-2020/
- Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes7y
Has anyone heard of housingalerts.com and Ken Wade and/or might be interested in pooling funds for a subscription? A "divide & conquer" approach to mitigate the risk of this being a lame tool, or finding the answer to this thread question?
- Real Estate Agent · Las Vegas, NV · Member since 2017 · 279 posts · 133 votes7y
Adrienne -
YES! Have you seen the sales charts for Vegas this past month? We went from 2,600 sales in September to LESS THAN 500 IN OCTOBER! I looked up the 10 year history, and that has not happened in at least the last 10 years. I understand this season gets slow but there is DEFINITELY a market correction taking place right now. Between the price resistance we were already seeing the and interest rates going up for a 4th time this year, the demand for housing has dipped far under the supply. Call your seller and encourage a price reduction. There have been more than 1,200 in the past 7 days. 2 months ago, that number was single digits.
- 7yWill M.Las Vegas · Member since 2018 · 21 posts · 6 votesOP
Originally posted by @Owen Dashner:
Why not dollar cost average and keep buying good deals regardless of the market? You can't time it, so just keep finding good solid deals relative to whatever market you are in. As Russell said above, you will still have your mortgage paid off by someone else and own a free and clear asset someday. There will always be people looking to live in rental properties, especially when there are big downturns and people can't get financing to buy.
Thanks Owen
- 7yWill M.Las Vegas · Member since 2018 · 21 posts · 6 votesOP
Originally posted by @Dave G.:
I have the funding and am ready to pull the trigger, but have not bought anything in 2018 yet. Having a hard time finding deals where the #s work.
I'm will go against the grain with most folks and say you can time the market to some degree. I'm not a young person and have seen multiple real estate cycles over the past 40 years. As @Russell Brazil pointed out, if you're in certain parts of the country the cycles are more extreme and can be (admittedly imprecisely) played. My wife and I saw the lunacy in 2004-2006 and sat on the sidelines. We started buying in 2009 with acquisitions nearly ever year since.
Our we in 2008 again? I don't think so for many reasons already pointed out in this thread. Labor supply constraints in the trades is also a big limiting factor to the overbuilding 10 years ago that contributed to the collapse.
So I am still bullish, but will only buy when the numbers work.
Thanks Dave. As this is my first RE investment, I want to maximize my cash flow. If waiting a year means I can save 10-15%, that would be worth it. But as many have pointed out, no one has a crystal ball.
- 7yWill M.Las Vegas · Member since 2018 · 21 posts · 6 votesOP
Originally posted by @Darren Mesibov:
@Will M. Yes, you are correct that it’s likely that you could loose equity by buying near the top of the cycle, however if you are a buy and hold investor you don’t necessarily need to realize said loss by selling at or near the bottom. I cant speak to your situation, but for my investment strategy it makes more sense to focus on cash flowing properties In steady growth markets for this reason, and even more so during times such as these. Furthermore, by focusing on cash flow you can better position yourself to withstand a correction. In the end, after you have made your money, appreciation is just the icing on the cake.Thanks Darren
- 7yWill M.Las Vegas · Member since 2018 · 21 posts · 6 votesOP
Originally posted by @Richard Sherman:
I have more than doubled the number of units this year and will try to do the same next year. If you are in an area with favorable demographic trends (% moving in vs % leaving) and barriers to additional capacity (I am in the greater Portland metro market) combined with very cheap debt if you can get it, and the plan is a non transactional purchase (i.e. buy and hold) then I think that in 10 years I will be looking back wish I had bought more even if there is a rollercoaster in the middle. The question you ask has been asked probably ever since the bottom of 2008 correction and every year since. Buy smart, do not over leverage, spend the time looking for deals that do work even if they require more effort. Rents in a lot of markets went UP as prices went down, and if you are after the rents and do not plan to sell then who cares what the "value" is.
I guess where the 'value' becomes a factor is my buying power. The less I spend on a property in a 'hot' market is more I can invest. But yeah, I hear you on buying smart. Thanks for the reply.
- 7yWill M.Las Vegas · Member since 2018 · 21 posts · 6 votesOP
Originally posted by @Kevin Dong:
I am still buying like crazy regardless. Just becareful when u buy. I typically paying 70% or less of what a property is worth when I buy. And I don't think this time will drop more than 30%. I will be fine even if the market corrected tomorrow . And I am flipping the low end property. So worse case I can still rent it out for a decent cash flow
70% of what a property is worth is great. Nice work.
- 7yWill M.Las Vegas · Member since 2018 · 21 posts · 6 votesOP
Originally posted by @Adrienne Medina:
@Will M. I sell real estate in Las Vegas and while we are seeing a little bit of a slow down these last couple of months in the over 300k price point, I don't think we are at the top of the market and we are still lower than 2006 prices. So many projects are projected for completion in 2020 including the Raiders stadium and now rumors of an MLB stadium where Rio is...I think it will be at least 2 or 3 years before the market stabilizes. https://www.reviewjournal.com/business/casinos-gaming/6-major-projects-could-reshape-las-vegas-strip-skyline-by-2020/Thanks for the insight and article Adrienne.
- 7yWill M.Las Vegas · Member since 2018 · 21 posts · 6 votesOP
Originally posted by @Brad Bellstedt:
Adrienne -
YES! Have you seen the sales charts for Vegas this past month? We went from 2,600 sales in September to LESS THAN 500 IN OCTOBER! I looked up the 10 year history, and that has not happened in at least the last 10 years. I understand this season gets slow but there is DEFINITELY a market correction taking place right now. Between the price resistance we were already seeing the and interest rates going up for a 4th time this year, the demand for housing has dipped far under the supply. Call your seller and encourage a price reduction. There have been more than 1,200 in the past 7 days. 2 months ago, that number was single digits.
Ah, OK. This makes sense and what I thought was happening in Vegas. Thanks for the insight.
- Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes7y
Originally posted by @Will M.:
Originally posted by @Dave G.:
I have the funding and am ready to pull the trigger, but have not bought anything in 2018 yet. Having a hard time finding deals where the #s work.
I'm will go against the grain with most folks and say you can time the market to some degree. I'm not a young person and have seen multiple real estate cycles over the past 40 years. As @Russell Brazil pointed out, if you're in certain parts of the country the cycles are more extreme and can be (admittedly imprecisely) played. My wife and I saw the lunacy in 2004-2006 and sat on the sidelines. We started buying in 2009 with acquisitions nearly ever year since.
Our we in 2008 again? I don't think so for many reasons already pointed out in this thread. Labor supply constraints in the trades is also a big limiting factor to the overbuilding 10 years ago that contributed to the collapse.
So I am still bullish, but will only buy when the numbers work.
Thanks Dave. As this is my first RE investment, I want to maximize my cash flow. If waiting a year means I can save 10-15%, that would be worth it. But as many have pointed out, no one has a crystal ball.
The housing collapse from a decade ago had a 12% drop nationally. The worst economic crisis of our lives. Expecting a future 10-15% drop in the near future isnt really something you should plan for.
District Invest Group545 Reviews - 7yWill M.Las Vegas · Member since 2018 · 21 posts · 6 votesOP
Originally posted by @Russell Brazil:
Originally posted by @Will M.:
Originally posted by @Dave G.:
I have the funding and am ready to pull the trigger, but have not bought anything in 2018 yet. Having a hard time finding deals where the #s work.
I'm will go against the grain with most folks and say you can time the market to some degree. I'm not a young person and have seen multiple real estate cycles over the past 40 years. As @Russell Brazil pointed out, if you're in certain parts of the country the cycles are more extreme and can be (admittedly imprecisely) played. My wife and I saw the lunacy in 2004-2006 and sat on the sidelines. We started buying in 2009 with acquisitions nearly ever year since.
Our we in 2008 again? I don't think so for many reasons already pointed out in this thread. Labor supply constraints in the trades is also a big limiting factor to the overbuilding 10 years ago that contributed to the collapse.
So I am still bullish, but will only buy when the numbers work.
Thanks Dave. As this is my first RE investment, I want to maximize my cash flow. If waiting a year means I can save 10-15%, that would be worth it. But as many have pointed out, no one has a crystal ball.
The housing collapse from a decade ago had a 12% drop nationally. The worst economic crisis of our lives. Expecting a future 10-15% drop in the near future isnt really something you should plan for.
Good point. I guess I'm sort of extra cautious because Vegas did see like a 40% (not sure off the top of my head) drop. Thank you for the nation-wide insight.
- Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes7y
As the stock market took another hit today, I'm definitely not slowing down on buying real estate. Where should I put my money? In my mattress? I have extra cash right now, and I sure do not want to add it to my brokerage account right now. I'm closing on another duplex here in December. Buy and hold rentals is all I do in real estate at the moment. I'm now looking for a value add/deferred maintenance 8-16 plex. Seems like the prudent thing to do right now. Even if my equity remains at zero for a few years, the cash flowing properties with tenant paying your mortgage, and the tax benefits, will be better than what the rest of my portfolio has done this year.
- 7yWill M.Las Vegas · Member since 2018 · 21 posts · 6 votesOP
Originally posted by @Anthony Wick:
As the stock market took another hit today, I'm definitely not slowing down on buying real estate. Where should I put my money? In my mattress? I have extra cash right now, and I sure do not want to add it to my brokerage account right now. I'm closing on another duplex here in December. Buy and hold rentals is all I do in real estate at the moment. I'm now looking for a value add/deferred maintenance 8-16 plex. Seems like the prudent thing to do right now. Even if my equity remains at zero for a few years, the cash flowing properties with tenant paying your mortgage, and the tax benefits, will be better than what the rest of my portfolio has done this year.
Excellent point about the stock market. If you want a return, you have to invest somewhere, right? So yeah, while RE may take a hit in a correction, everything else will prob take a hit too. Great point. Thanks for the insight.
- Investor · Menifee, CA · Member since 2015 · 25 posts · 15 votes7y@Will M. I have rentals in 3 states and watch markets in 1 other. I've noticed a general trend of slowing recently all over, most heavily in California. IMO that's not scary at all. 1. Lending restrictions became VERY (ridiculously) tight in 06 and beyond and have not loosened to pre-06 levels. Banks are GENERALLY lending to people who can actually afford it with solid products. 2. The affordability index is solid. This is a ratio between the median income of an area compared to the median home price. If 20% or less of an areas population can afford to buy a house then you're headed for trouble. In my area of CA for the past 6 months prices have stayed the same or gone down a little but median income has risen. That's an excellent sign. That's what a housing market should behave like. 2006 was not normal. And it extended for so long because there was too much market manipulation. Right now the economy is humming, job movement is high which causes wages at all levels to rise, job creation numbers and gdp are at healthy levels. 3. Construction drives the market and you can't spit anywhere in this country without hitting two new developments. If you're ever not too sure about a market, look at what the big dog builders are doing. They hire swarms of analysts whose entire life is studying trends and markets. 4. You're in Vegas...you are the closest pit stop to the largest market in America (So Cal). CA restrictions and taxes are strangling businesses. NV has some of the loosest restrictions and friendliest taxes. Your CA transplant job market and net migration is high and will continue to be so. 5. Get in the game or you'll be in the nursing home wishing you had!
- 7yWill M.Las Vegas · Member since 2018 · 21 posts · 6 votesOP
Originally posted by @Jenn A.:
@Will M. I have rentals in 3 states and watch markets in 1 other. I've noticed a general trend of slowing recently all over, most heavily in California. IMO that's not scary at all. 1. Lending restrictions became VERY (ridiculously) tight in 06 and beyond and have not loosened to pre-06 levels. Banks are GENERALLY lending to people who can actually afford it with solid products. 2. The affordability index is solid. This is a ratio between the median income of an area compared to the median home price. If 20% or less of an areas population can afford to buy a house then you're headed for trouble. In my area of CA for the past 6 months prices have stayed the same or gone down a little but median income has risen. That's an excellent sign. That's what a housing market should behave like. 2006 was not normal. And it extended for so long because there was too much market manipulation. Right now the economy is humming, job movement is high which causes wages at all levels to rise, job creation numbers and gdp are at healthy levels. 3. Construction drives the market and you can't spit anywhere in this country without hitting two new developments. If you're ever not too sure about a market, look at what the big dog builders are doing. They hire swarms of analysts whose entire life is studying trends and markets. 4. You're in Vegas...you are the closest pit stop to the largest market in America (So Cal). CA restrictions and taxes are strangling businesses. NV has some of the loosest restrictions and friendliest taxes. Your CA transplant job market and net migration is high and will continue to be so. 5. Get in the game or you'll be in the nursing home wishing you had!Excellent points.
"5. Get in the game or you'll be in the nursing home wishing you had!" Ha! Great! Love it!
Thanks for the reply.
- Rental Property Investor · Montgomery, AL · Member since 2017 · 277 posts · 221 votes7y
If you are a buy and hold investor the ebbs and flows of real estate pricing shouldn't be of much concern but rising interest rates can be very scary if you plan to use adjustable rate loans from local banks. My advice is to continue to look for good deals and if you come across one snatch it up, but use 30 year fannie or freddie fixed rate debt. Many investors who bought during the sweet-spot of 2012-2015 are starting to reach the end of the 5 year fixed rate portion of their loans and will soon be very exposed to interest rate risk as rates continue to rise.
- Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes7y
There is no such thing as buying at the bottom. In fact, you do not know it is at the bottom until you pass a few quarters. You can postpone or delay the process even interest goes to 6%+ at similar or higher or slightly lower price soon.
Economists start debating when the next recession is coming. Some say 2019 year-end some dispute as coming later. If there is a recession affecting jobs, home values it will last more than a year more like several years in a row. In 1987 the stock 30% drop eventually hit the RE market, it took close to 10 years in West Coast before one saw home prices hiking up.
If the number, cash flow look good, no harm to make offers. If you delay you may regret why not do it earlier....
Sam Shueh
- All Over, USA · Member since 2017 · 689 posts · 756 votes7y
Originally posted by @Will M.:
Originally posted by @Russell Brazil:
Originally posted by @Will M.:
Originally posted by @Dave G.:
I have the funding and am ready to pull the trigger, but have not bought anything in 2018 yet. Having a hard time finding deals where the #s work.
I'm will go against the grain with most folks and say you can time the market to some degree. I'm not a young person and have seen multiple real estate cycles over the past 40 years. As @Russell Brazil pointed out, if you're in certain parts of the country the cycles are more extreme and can be (admittedly imprecisely) played. My wife and I saw the lunacy in 2004-2006 and sat on the sidelines. We started buying in 2009 with acquisitions nearly ever year since.
Our we in 2008 again? I don't think so for many reasons already pointed out in this thread. Labor supply constraints in the trades is also a big limiting factor to the overbuilding 10 years ago that contributed to the collapse.
So I am still bullish, but will only buy when the numbers work.
Thanks Dave. As this is my first RE investment, I want to maximize my cash flow. If waiting a year means I can save 10-15%, that would be worth it. But as many have pointed out, no one has a crystal ball.
The housing collapse from a decade ago had a 12% drop nationally. The worst economic crisis of our lives. Expecting a future 10-15% drop in the near future isnt really something you should plan for.
Good point. I guess I'm sort of extra cautious because Vegas did see like a 40% (not sure off the top of my head) drop. Thank you for the nation-wide insight.
Vegas is a very different place than it was pre-crash. It has done a great job stabilizing itself to prevent future 40% drops. I remember back then you could find condos over by Lake Las Vegas for like $30k! And condos on the strip for <$100k. Ha!
Join the conversationCreate a free account to reply, vote on answers and follow this thread.