What would you do, expand now or wait ?

18 Replies

Option 1) Take out equity on a rental property to refinance another deal 

Option 2) Double down and quickly pay off another mortgage on a rental property - hopefully in less than 8 years.

Option 3) Just continue saving assuming that you believe that a recession is coming 

Issues.  Options 1 could potentially make me highly leveraged (more than I would like to be) thus there would be little room to maneuver if crisis does exist in the properties that I currently have. Also the goal has always been to have other people (rentals) pay the mortgages  which means doubling down to quickly pay off 1 mortgage equals using my money.

Additionally, I do believe that there is a recession looming thus a bargain may be on the horizon in the next 2-3 years . I don't think its going to be anywhere near the 2008 financial crisis - but I do believe we are due for something.

What would you do and why ? 

Debt is great for growth. If I had one rental, I'd take on more debt to scale. I wouldn't start paying off mortgages until I hit the amount of units I want to have. Assuming you have deals still in your market.

Sounds like your risk adverse. Maybe paying units off as you go is a good strategy for you. It's slower though.

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I can't dispute any of the comments above.  I do need to scale-up with debt at some point if i am to ever increase revenue.  I just need to figure out the right threshold

@Dee Shaun

We are at or very near a market top. It could very well be a major top. If it is, the correction will be more severe than 2008.

Over leveraged investors will wiped out.

Either find deals at 50% or more discount or save your money and pick them up for 20-40 cents on the dollar in a few years.

@Dee Shaun do you think that an economic downturn will benefit you more than the other scores of investors sitting on the sideline? My hunch is that the RE scene will be fairly competitive during a downturn since more folks will be prepared for it this time, and many, like you, are waiting for the opportunity to dive in deeper.

No one knows how the real estate market will react to a recession that may or may not come. The recession could be 2yrs from now. People then will have to lose their jobs and then miss payments and then have foreclosures. So you are going to wait for 3-4yrs then buy?  What if the recession does not affect housing? Just because there is a recession does not mean housing prices go down. 

So if you are wrong then you wasted 3-4yrs waiting on nothing and then have to buy at even worst prices.  I am not saying to buy everything now. What I am saying is no one knows what prices will do.  What I do is buy when markets are going up which confirms my hypothesis, buy when it's flat, and buy when it goes down. The key is to know your risk and have enough reserves for each property and savings to take advantage of the given opportunities. 

Id suggest saving like you are about to hit a recession, but invest like there is no tomorrow. Life is too short to wait. 

Buy a decent deal. Have reserves. Be flexible, to a degree, with your numbers. (Rent, returns, etc) and invest. You should be doing this in a booming economy or in a downturn. I’ve said it on here before and I’ve said it again.... pretty much everyone was struggling in the last GFC. Not sure where the idea that mom and pop, small time investors are going to absolutely crush it the next go around. Your 100k acquired by not investing isn’t going to go very far when you can’t get loans/credit. Take advantage of the cheap money we have access to at the moment. I’d summarize it by saying “be aggressive but responsible”. Good luck!

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@Dee Shaun

Scared or cautious. There are still deals to be had, but they have to be stress tested for a possible 50% drop in rents. What good is is having long term rentals if one cannot hold unto them during a downturn. The problem is most people, even real estate investors, completely underestimate the severity of what lies ahead.

Buying a house that ends up cash flowing only $150/mo is a very bad idea in the current environment.

Though I have no way to predict exactly when the recession might hit - it might have even started - and even the pundits don't know.   I find it hard though not to believe that investor's sentiments are currently low. 

Argentina just shed  48% .  We still don't know what is going to happen between us and China.  And more than likely, Britain will crash out of the EU.

Yea, I will sit on the sideline for a few months to see what happens.   Thanks for all the input