$40000 saved to invest in rentals/right time or save more/wait
Member since 2019 · 13 posts · 2 votes
I have $40000 saved and want to get into the real estate investing game. However, my intuition is telling me that I should wait till I have $100000 saved then go for it which I can probably have by late fall of 2020. My other intuition: we are at the top of the market which means I would be the sucker with $40000 grand saved up, bought my property at the top and could've saved $100000 on a similar property if I had waited, could have saved another $60000 in my bank for emergencies. AND, the numbers to do not add up on any of the properties around my area.
I'd venture a pretty sizable bet that you could find people on this forum who were talking about the "top of the market" back in 2016. Here we are, nearly four years later, and I'd also bet a number of those people are still waiting for the market to drop.
Your caution is understandable and healthy. No one has a crystal ball that is going to tell them exactly when the market is going to drop (or where). If you are sitting on the sidelines waiting for the perfect time to invest, you'll likely be waiting for a looong time. And then if there IS a big market correction, people often find themselves lacking the necessary experience to give them the courage to invest in a down market.
The Three Immutable Laws of Real Estate Investing (courtesy of @Joe Fairless)
If you invest with those 3 things in place AND buy a property at a discount (BRRRR), you will survive most market conditions and time (the investor's best friend) will do its work.
I'd venture a pretty sizable bet that you could find people on this forum who were talking about the "top of the market" back in 2016. Here we are, nearly four years later, and I'd also bet a number of those people are still waiting for the market to drop.
Your caution is understandable and healthy. No one has a crystal ball that is going to tell them exactly when the market is going to drop (or where). If you are sitting on the sidelines waiting for the perfect time to invest, you'll likely be waiting for a looong time. And then if there IS a big market correction, people often find themselves lacking the necessary experience to give them the courage to invest in a down market.
The Three Immutable Laws of Real Estate Investing (courtesy of @Joe Fairless)
If you invest with those 3 things in place AND buy a property at a discount (BRRRR), you will survive most market conditions and time (the investor's best friend) will do its work.
Thank you so much for you response! Yeah, my wife and I think that we need to wait till we have the reserves, $100,000 seems suffice. Point number 3 is so right on, cash reserves are exactly what I was thinking would be the key strategy to weathering a storm such as a recession.
AND, in this Utah market, cash flow is a toughie unless you buy the house with a mother-in-law. Multi units here DO NOT cash flow unless place 30% down or more. An investment that is not cash flowing would mean I am loosing more money during a downturn.
Hey @Bradley Penrod
I totally get where you are coming from. I have been budgeting and saving for a couple years now and keep wondering if now is the right time, or if we will see a market correction soon and have been trying to be "patient". I have used the time to educate myself on the different strategies of investing and have decided to invest now if I find the right opportunity.
I love what @Neil Henderson shared with the 3 immutable laws. If you follow them you can survive during a downturn and then you are that much better positioned to thrive as the market comes back. You will have the network and experience in place to have a much bigger head start on everyone who waited until the downturn happened to try and start building the relationship and closing deals. You will already have the reputation of being someone who closes deals and the best deals will come to you first.
I agree that Utah is a tough market right now and is really hard to find deals that cashflow. that is why I have started looking out of state. David Green has a book on long distance RE investing and it is all about building a team of the right people. If you are thinking you want to get in the game, it may be worth considering investing out of state.
Good luck in whatever direction you choose to go.
Those who try to predict the market tend to see lower average returns than those who actively invest on an ongoing basis by making informed decisions based on current market conditions. What I'm saying is, you'll lose a lot of time, opportunity, and money by waiting. I started investing with $5k. Granted, I was young and house hacking. You know your market better than I do, and 9 months isn't that long if you really want to wait and build those reserves, but I can't imagine waiting until I had $100k saved up to get started. What have you done to find distressed sellers and below-market properties? What are other local investors doing to find deals? Are you active in your local REI community by attending meetups?
That being said, if you do decide to wait, there's a LOT you can do now to build your brand and reputation. Keep networking on BP and in person, read, listen to podcasts, and learn as much as you can between now and then. Good luck!
Hey @Bradley Penrod
I totally get where you are coming from. I have been budgeting and saving for a couple years now and keep wondering if now is the right time, or if we will see a market correction soon and have been trying to be "patient". I have used the time to educate myself on the different strategies of investing and have decided to invest now if I find the right opportunity.
I love what @Neil Henderson shared with the 3 immutable laws. If you follow them you can survive during a downturn and then you are that much better positioned to thrive as the market comes back. You will have the network and experience in place to have a much bigger head start on everyone who waited until the downturn happened to try and start building the relationship and closing deals. You will already have the reputation of being someone who closes deals and the best deals will come to you first.
I agree that Utah is a tough market right now and is really hard to find deals that cashflow. that is why I have started looking out of state. David Green has a book on long distance RE investing and it is all about building a team of the right people. If you are thinking you want to get in the game, it may be worth considering investing out of state.
Good luck in whatever direction you choose to go.
Casey, thank you so much for responding. Just learning the ropes and need as much support as possible from pro level investors. I really appreciate your input.
Those who try to predict the market tend to see lower average returns than those who actively invest on an ongoing basis by making informed decisions based on current market conditions. What I'm saying is, you'll lose a lot of time, opportunity, and money by waiting. I started investing with $5k. Granted, I was young and house hacking. You know your market better than I do, and 9 months isn't that long if you really want to wait and build those reserves, but I can't imagine waiting until I had $100k saved up to get started. What have you done to find distressed sellers and below-market properties? What are other local investors doing to find deals? Are you active in your local REI community by attending meetups?
That being said, if you do decide to wait, there's a LOT you can do now to build your brand and reputation. Keep networking on BP and in person, read, listen to podcasts, and learn as much as you can between now and then. Good luck!
Nicole, thank you so much for making me think a little outside of my mind. I may be reading too many post about others not having luck because luck is a numbers game. I could start to look at little more closely at distressed properties, my day job brings quite a bit to cover the cost of having someone to fix it up. I just don’t know too much about rehabbing and contractors.
@Bradley Penrod I highly recommend J. Scott's books on house flipping. Even if you're BRRRRing, those books are worth a read to increase your comfort level with rehabs.
Thanks Nicole. I really appreciate your feedback. Really! I am just learning all of this.