New to Real Estate · Rock Island, TN · Member since 2019 · 97 posts · 69 votes
What are your thoughts on the positives vs negatives of investing now vs waiting to see what will happen with this market. I feel like a lot of the experts are saying stay in cash and wait (Bigger pockets podcast last couple episodes). My gut instinct says the same to wait it out. Though what are my best ways to avoid analysis paralysis while waiting? What are you all doing?
PS. Stay safe, stay positive. We will all make it out of this on the other side. Positive vibes going out to the whole Bigger Pockets community.
Rental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes
6y
I'm pushing ahead with my initial plan for this year. My plan was to sell one of my properties and using the 1031 exchange move that money into more properties that get me better cash flow. I have 4 duplexes under contract right now.
I just secured 3.99% financing on a 30 year fixed rate mortgage on an investment property. That is unbelievably low. My thought is that it may be a lot harder to access credit in a few months. That would mean that even if you have good credit and enough cash for a down payment, you may have difficulty getting a loan.
My other thought is that we will be moving into an inflationary environment. Those who hold onto cash in that kind of environment will not do as well as those who hold assets like real estate. For that reason I am keeping the majority of my wealth in real estate, though keeping enough cash on hand to cover 6+ months of expenses.
I feel many foreclosures are coming in 6 months. Tenants can’t pay landlords, landlords can’t evict, landlords can’t pay mortgage, employers laid off employees, employees can’t pay mortgage. Forbearance is a delay in paying your mortgage. In 90 days will the mortgage payment be there. Are banks going to defer payments to the end of your mortgage. A few maybe. It could be devastating. Keep your cash, because, the economic opportunity is coming unless we see another stimulus package that is clearly geared towards mortgage payments.
New to Real Estate · Rock Island, TN · Member since 2019 · 97 posts · 69 votes
6y
@Kenneth Garrett Thanks for the advice, this is also what I have been thinking. I just wanted to make sure it wasn't me trying to come up with excuses to delay getting started.
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
6y
@Nick Troutman I'm leaning towards waiting for opportunities BUT if a good deal presents it's self I'd buy. Timing the market is nearly impossible and it's save to assume no one expected a virus outbreak! I would not hunt for multi family or commercial real estate at this time since those sectors are getting hammered.
Rental Property Investor · Woodstock, GA · Member since 2017 · 517 posts · 772 votes
6y
I'm being pretty cautious.
The comps from 3 months ago are probably expired. So unless you're getting an amazing deal at 65% ARV (or lower), it's probably best to pass for now unless your area hasn't slowed down a bit.
There's a lot of uncertainty and unless you can fund a ton of deals right now, there's no point in blowing all your ammo on an average deal right now.
Rental Property Investor · Omaha, NE · Member since 2014 · 2k+ posts · 3k+ votes
6y
I'm pushing ahead with my initial plan for this year. My plan was to sell one of my properties and using the 1031 exchange move that money into more properties that get me better cash flow. I have 4 duplexes under contract right now.
I just secured 3.99% financing on a 30 year fixed rate mortgage on an investment property. That is unbelievably low. My thought is that it may be a lot harder to access credit in a few months. That would mean that even if you have good credit and enough cash for a down payment, you may have difficulty getting a loan.
My other thought is that we will be moving into an inflationary environment. Those who hold onto cash in that kind of environment will not do as well as those who hold assets like real estate. For that reason I am keeping the majority of my wealth in real estate, though keeping enough cash on hand to cover 6+ months of expenses.
Investor · Member since 2017 · 16 posts · 35 votes
6y
I agree patience is key..and this by no means is advice to go out and pull the trigger
One thing to consider,
3 weeks ago the market turned dramatically. (where i live) 3 or so weeks ago before the virus really hit North America, our market saw multiple offer situations (on pretty much everything) . I had one young investor make 5 offers and not one accepted. Everything was sold over asking and "no conditions" (remember these are SFH) . The old saying "be fearful when people are buying and buy when people are fearful" is true.
there is as much fear right now... as ever.
It is now a buyers maket and you have leverage.
Nobody will know forsure what the outcome is 6-8 months from now when the defaults wiggle its way through the system.
@Anthony Gayden, I really like the way you are analyzing the situation, is a good way to see the situation from another angle, and it definitely got me thinking. It's awesome that you have savings to cover your expenses for 6 months.
San Diego, CA · Member since 2016 · 86 posts · 46 votes
6y
If you are a 1031 Investor now may be a great time to use the rare extensions as highlighted below. Just food for thought!
IRS issued Notice 2020-23 which provided extensions to Section 1031 exchange deadlines. This Notice extends any 45-day or 180-day deadlines that occur between April 1, 2020 and July 14, 2020 to July 15, 2020. Please note, this extension applies to all taxpayers with exchange deadlines within this time frame. Previously with other extensions involving natural disasters, the IRS has provided for a longer 120-day extension period but relief was provided only to “affected” taxpayers. This relief is broader as it is being universally applied, and the extension date of July 15, 2020 is the same for everyone.
Taxpayers in a reverse exchange will also receive the extension to July 15, 2020 for their 45-day or 180-day deadlines that fall within the extension window, between April 1, 2020 and July 14, 2020.
The following examples are provided for clarity:
Taxpayer closed escrow on the relinquished property on February 20, 2020. The 45-day identification deadline was April 5, 2020 and the 180-day deadline to complete the exchange is August 18, 2020.
Taxpayer would receive an extension to their 45-day identification deadline to July 15, 2020 as April 5, 2020 is within the extension window.
Taxpayer would not receive an extension to the 180-day deadline as August 18, 2020 falls outside the extension window.
Taxpayer closed escrow on the relinquished property on December 18, 2019. The 45-day identification deadline was February 1, 2020 and the 180-day deadline to complete the exchange is June 15, 2020.
Taxpayer would not receive an extension to their 45-day identification deadline to July 15, 2020 as February 1, 2020 falls outside the extension window.
Taxpayer would receive an extension to the 180-day deadline to complete the exchange to July 15, 2020 as June 15, 2020 falls within the extension window.
Rental Property Investor · Rochester, MN · Member since 2017 · 224 posts · 323 votes
6y
With residents not being able to pay rent to some extent or another, many savvy investors are getting the small business loans to keep afloat. That takes time, effort, energy to do. I feel there will be a lot of landlords (especially older) who will not want to go through the headache of getting these loans, and will say ‘now is probably a good time to get rid of this dang property.’ This will create some great opportunity for buyers to find deals.
So I wouldn’t stop looking. Double down on your search efforts. It’s never a bad day for a good deal!
Real Estate Coach · Charlotte, NC · Member since 2016 · 399 posts · 341 votes
6y
@Nick Troutman id echo the sentiment of caution, but want to add a note to the comment about not getting into multifamily. I assume the comment was in regards to large multifamily, not 2-4 unit...the larger deals have a lot more credit and interest rate risk due to the type of loan, but IMO 2-4 units are a safer bet than SFH right now
It's the age old discussion about mitigating risk by owning multiple units...I have 12 units and 3 mortgages. I need 3-4 units occupied and paying rent to cover all my debt payments, a fact that makes me feel much safer in times like now. SFH still isn't a bad way to go, but don't shy away from multifamily because someone said it
Moreover, and i know this isn’t what you asked for, but it’s important to realize that there are a million ways to invest in real estate. You should never make a decision based on a single comment by anyone, no matter how smart they are. Take their advice under advisement, but make your own decision. What works for me may not work for you
Real Estate Agent · Winter haven, FL · Member since 2011 · 572 posts · 336 votes
6y
I am not a huge stock guy but the market is a so low you can close your eyes pick a stock and probably double your money in a week(of coarse I'm just trying to make a point education is needed). Real estate moves slower than the market be patient find a different avenue to build up capital like the stock market. Occupancy will go done, investors will panic and jump ship and prices will fall! I say wait.
Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes
6y
@Nick Troutman
I’m sitting on cash and pulling a line of credit on my free and clear rental. I want to be as liquid as possible. I doubt it will crash like 08, but I do believe it’s going down.
Investor · Parma, OH · Member since 2019 · 34 posts · 16 votes
6y
I have been watching the market here and I see little or no change in interest in SFH rentals. Somebody is apparently still working and moving.
Also, this is not a financial policy crisis like we've experienced before as in 2008. Instead it is an impacting event that has an acute affect (no pun intended) on specific industries that foster gatherings of people. It will take some time to see a ripple effect from it going to other industries but this impact will probably be limited.
Single stocks? We’ve made a ton of money offf of the total stock market index fund. Good luck with single. But low sell high
Yes, single stocks first mostly oil, banks and airlines. Airlines are the most fluctuating right now for me, so I'm getting ready to pull out and reposition to index funds. I hit big on few and some are still uncertain so I'm ready to play the long game. Any input is appreciated.
Rental Property Investor · Corvallis, OR · Member since 2018 · 840 posts · 1k+ votes
6y
@Nick Troutman early March I had a solid 1995 house flip under contract to purchase for $250k and seller would not come down $500 more. Weeks later, I saw the fear of this virus and also lost workers lined up due to this corona. Now, the ARV could in fact drop, but I am closing and leveraged my price down to $25k OFF and now closing for $225k. I am not worried long term, and see this as a buying opportunity. Amazing what fear of loss can do to a sellers mind in just weeks, huh?
@Anthony Gayden - I'm with you. This is definitely an unprecedented situation, but I think it could cause a significant amount of inflation. So, I don't want to hold on to all of my cash just to have a huge chunk of my buying power evaporate.
This next month will be important to show how many people will be paying rent. This will surely be region-dependent.
I live in the Midwest and I see opportunity in multi-family that is made up of mostly section 8 or otherwise subsidized tenants. I'm getting very close to an agreement to purchase 43 units that could potentially produce 50% cash-on-cash ROI if expenses stay under 50% of rents. The current owner collected 100% of rents in April.
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
6y
@Nick Troutman I was one of the first people who said to wait (over a month ago when this started). Real estate prices lag other market indicators like the stock market and unemployment. People are still buying and selling and they are using comparable prices from pre-COVID to support the value. The housing market simply has not caught up to the reality. With 20-30% of the country unemployed in the coming months, that will have a profound effect on the number of buyers. That alone will cause values to drop. Add to that investors who will see financial issues or tenants not paying, it will reduce the buyer pool even further. I have heard countless stories of investors pulling out of deals and banks cancelling financing - as late as days before closing. This will continue to get worse and prices will only drop once it hits critical mass. That could be months away. The bottom is as hard to find as the top of the market. What I do know is that now is not the time, because you need to let the chaos play out long enough to drive prices down. People today are still thinking in "PRE-COVID" terms. The good news is for flippers or even investors, there may still be an opportunity to sell at 2019 levels. Anyone buying at 2019 prices is probably overpaying in most markets.
Of course most of this depends on how long we are shut down. The wild card here is a miracle drug that allows faster return to normal. Short of that, we can expect this to last over a year. Yes over a year to some degree. There is no way they will allow any large gatherings until this is over, which means people in many industries are going to be hurt badly. (Wedding, entertainment venues, conferences, hotel, travel, theme parks, etc.)
I hope I am wrong. But if I am, what harm is there in waiting? The best case housing situation at this point is static prices.