Is a correction ahead? Should I wait to invest in RE?

8 Replies

I recently sold a few thousand dollars in stock that I’ve been accumulating over the past 4 years with the intention of buying and holding real estate. The plan was to acquire one rental before year end and two next year. However, I find myself struggling to take the leap now that the cash is in my savings. I’m reminded of an article I read during the bitcoin cash. The writer stated (paraphrased) that he knew the crash was coming when he heard two hotel workers discussing buying bitcoin so they could quit their jobs. Not saying that I condone the statement. Hotel workers are as capable as anyone else. But the point he was making was that once everyone is on the bandwagon, it’s too late. I joined BiggerPockets recently and have enjoyed learning, but once I started investigated real estate’ potential, I’m finding EVERYONE has been researching and purchasing real estate. I had no idea that two co-workers of mine have a couple rentals each. Am I late to the party? Should I hold off for a correction? Is there a correction? I know it can’t be predicted but what’s the opinion at the moment? My experience with stocks is that I tend to break them. Once I buy, they drop. Just have a feeling my real estate venture may be the same.

My advice (take it for what it's worth) - Log off of bigger pockets, spend 10-20 hours this week on the streets, visiting properties in person. By the end of the week you'll either be itching to make offers, or you'll have a list of reasons why you shouldn't buy real estate at this time..

If buying to rent out and you THINK a crash is coming, you will be fine as rent is stable and your numbers should work either way to make the deal, might have been able to purchase cheaper if you were right.  If buying to flip and will take a long time to rehab, you could get caught with pants down IF you are correct.

Someone is always predicting a correction and one day someone will be right.  If your goal is buy and hold then make sure you are buying at a discount and that it is a cash flowing property in a desirable area which will help protect yourself a downturn.  If you wait for a correction it could possibly take quite some time or be next week.  How will you know when the bottom of the market is to buy?  Do you want to wait an indefinite amount of time to buy at the bottom of the market or do you want to buy a cash flowing property tomorrow that might lose value on paper, but will eventually recover?

that story of two hotel employees is old as the hills.. in various forms I first heard it during the dot com bubble of 2001.

Heres the thing with waiting out markets.

Unless your all cash .. in a retreating market or down market the lenders are also retreating and not loaning.

And or credit gets very tough especially for investment properties.  And or those with limited experience in investment properties and limited financial means.

So if your cash OK.. if your relying on financing.. right now rates are great and time will even things out.. 

we get in a bad market and rates will generally rise and like I said credit gets tight you may not be able to buy.

I think with RE as with other investments you cant rely on timing the market. 

If on the otherhand you have a long view,  then both the stock market (in the form of low cost index funds) or RE are good investments. 

However if you are looking for a quick buck then those types of deals require a lot of knowledge and luck! 

Unlike the stocks, you control much of the outcome with your real estate. Not the overall market of course, but the deal you purchase, how you finance it, how you manage it, etc. Down cycles last for a few years. You're not buying a rental property to hold it for just a few years. I might be more hesitant to start a new construction spec home deal right now, because you'll be dependent on the market and a buyer obtaining financing to exit the deal. But buying rental properties? Sure. Just buy right, and let it run.

@Jay Hinrichs a lot of great replies here. Thanks guys. I think I’m getting the jitters being that I’ve taken the steps of actually meeting a few realtors, looking at potential properties, and selling my stock for a down payment. But Jay, you make a great point. I will definitely be relying on financing and haven’t considered your perspective.

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