to buy or to wait?

Multi-Family and Apartment Investing
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to buy or to wait?

Jason Thompson
Wholesaler · usa · Member since 2021 · 222 posts · 67 votes

With so much speculation about the market and its direction, are you waiting on the sidelines, ready to pounce, or are you still pushing forward with conservative underwriting regardless of what the market does? 

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Justin Hammerle
Realtor · Providence, RI · Member since 2022 · 404 posts · 262 votes
3y

don't wait to buy real estate, buy real estate and wait : )

19Reply
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  • Justin Hammerle
    Realtor · Providence, RI · Member since 2022 · 404 posts · 262 votes
    3y

    don't wait to buy real estate, buy real estate and wait : )

    19Reply
  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 667 votes
    3y
    Quote from @Justin Hammerle:

    don't wait to buy real estate, buy real estate and wait : )


     I respectfully disagree. Looking at a marco view of the cycle were in, its arguably harder out there to find easy deals that will cashflow or generate instant passive streams. If you are a bullish right now and want to put your capital to work you need to focus on a few things: (theres more than just this, just some ex.)

    1. acquisitions with discounts. no bidding wars, I can almost guarantee you purchasing at asking price in any hood wont give you good COC

    2. BRRRR method - this is still okay if you do your personal uw clearly with accurate pro forma #s

    3. STR - short term rentals is where I see a lot of experienced players gravitate towards. The average person this time and day likes to live lavish and spend money. Airbnb is hot. It just depends if that's your style of investing.

    Be smart, don't just buy to buy. This is a time in the market where it is really important to know where you stand amongst the masses. It depends where you are in your investing career that will lead you to the answer to the questions you ask.

    happy hunting, gl.

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    2Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    The ones on the sidelines are not real investors. The real investors are buying and taking advantage of the market condition. 

    1Reply
  • Colin Higgins
    Member since 2022 · 77 posts · 47 votes
    3y

    run the numbers, run them again, and then ask for a second set of eyes.

    1Reply
  • Lyndsay Zwirlein
    Lender · Member since 2020 · 331 posts · 209 votes
    3y
    Quote from @Jason Thompson:

    With so much speculation about the market and its direction, are you waiting on the sidelines, ready to pounce, or are you still pushing forward with conservative underwriting regardless of what the market does? 

    It’s impossible to know what’s next, so I personally am sticking to our long term plan of continuing to acquire. However I'm
    underwriting extra conservatively and holding more reserves. I personally believe sellers are more willing to offer credits now to help buy down your rate and you’re facing less competition (depending on market). Plus inventory is still low so I think when (hopefully) rates go down, the competition will be back and potentially drive up prices. Again who knows what happens but my biggest priority is moving forward and underwriting safely. 
    0Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    3y
    Quote from @Jason Thompson:

    With so much speculation about the market and its direction, are you waiting on the sidelines, ready to pounce, or are you still pushing forward with conservative underwriting regardless of what the market does? 


    The only ones that make money on the sidelines are coaches :) Always deals. When buying at about all in 65% of the ARV, with 15% or better net caps, ( cash buys ) who cares about up or down 5- 10%

    Good luck 

    1Reply
  • Jason Thompson
    OP
    Wholesaler · usa · Member since 2021 · 222 posts · 67 votes
    3y
    Quote from @Justin Hammerle:

    don't wait to buy real estate, buy real estate and wait : )


     Excellent advice Justin

    0Reply
  • Jason Thompson
    OP
    Wholesaler · usa · Member since 2021 · 222 posts · 67 votes
    3y
    Quote from @Devin Peterson:
    Quote from @Justin Hammerle:

    don't wait to buy real estate, buy real estate and wait : )


     I respectfully disagree. Looking at a marco view of the cycle were in, its arguably harder out there to find easy deals that will cashflow or generate instant passive streams. If you are a bullish right now and want to put your capital to work you need to focus on a few things: (theres more than just this, just some ex.)

    1. acquisitions with discounts. no bidding wars, I can almost guarantee you purchasing at asking price in any hood wont give you good COC

    2. BRRRR method - this is still okay if you do your personal uw clearly with accurate pro forma #s

    3. STR - short term rentals is where I see a lot of experienced players gravitate towards. The average person this time and day likes to live lavish and spend money. Airbnb is hot. It just depends if that's your style of investing.

    Be smart, don't just buy to buy. This is a time in the market where it is really important to know where you stand amongst the masses. It depends where you are in your investing career that will lead you to the answer to the questions you ask.

    happy hunting, gl.


     Thank you for your advice. Do you think break-even ratios and DSC would be a good hedge against a deteriorating market, making it less risky?

    0Reply
  • Jason Thompson
    OP
    Wholesaler · usa · Member since 2021 · 222 posts · 67 votes
    3y
    Quote from @Eliott Elias:

    The ones on the sidelines are not real investors. The real investors are buying and taking advantage of the market condition. 


     I like your style Eliott, get in the arena and get dirty!

    0Reply
  • Jason Thompson
    OP
    Wholesaler · usa · Member since 2021 · 222 posts · 67 votes
    3y
    Quote from @Colin Higgins:

    run the numbers, run them again, and then ask for a second set of eyes.


     I couldn't agree more Colin, conservative underwriting is the key to making your investments 'safer' 

    0Reply
  • Jason Thompson
    OP
    Wholesaler · usa · Member since 2021 · 222 posts · 67 votes
    3y
    Quote from @Lyndsay Zwirlein:
    Quote from @Jason Thompson:

    With so much speculation about the market and its direction, are you waiting on the sidelines, ready to pounce, or are you still pushing forward with conservative underwriting regardless of what the market does? 

    It’s impossible to know what’s next, so I personally am sticking to our long term plan of continuing to acquire. However I'm
    underwriting extra conservatively and holding more reserves. I personally believe sellers are more willing to offer credits now to help buy down your rate and you’re facing less competition (depending on market). Plus inventory is still low so I think when (hopefully) rates go down, the competition will be back and potentially drive up prices. Again who knows what happens but my biggest priority is moving forward and underwriting safely. 

     I agree Lindsay, some creative financing is also a great opportunity with some sellers offering to hold a mortgage and keeping proforma's ultra-conservative. 

    0Reply
  • Jason Thompson
    OP
    Wholesaler · usa · Member since 2021 · 222 posts · 67 votes
    3y
    Quote from @Bob S.:
    Quote from @Jason Thompson:

    With so much speculation about the market and its direction, are you waiting on the sidelines, ready to pounce, or are you still pushing forward with conservative underwriting regardless of what the market does? 


    The only ones that make money on the sidelines are coaches :) Always deals. When buying at about all in 65% of the ARV, with 15% or better net caps, ( cash buys ) who cares about up or down 5- 10%

    Good luck 


     Solid advice Bob, have a great weekend.

    1Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    3y

    I’ve bought 5 properties in the last 7 months. It’s all about “time in the market, not timing the market.” If it cash flows, then I’m interested. I don’t buy for appreciation. That will happen over time. As well as market rent. So I’m ok buying now, then holding for decades and letting my tenants pay off my properties.

    2Reply
  • Karl B.
    Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes
    3y

    I'm making offers, as I always have. I'm currently under contract on a commercial property that was priced stupid low and am also making offers on SF and MF. 

    In my market SF/MF inventory still isn't high and so properties are still selling pretty well - multiple offers and prices really haven't dropped. 

    0Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    3y

    In many markets the prices have not declined enough to compensate for the rate increases for financed purchases.  From below 3% to 6.5% results in ~50% increase to the mortgage payment.  The effect of this is that for buy and hold, it is harder to find properties that provide a return that is better than more passive returns.

    Note interest rates are less critical for short holds such as for a flip, but flippers have to be cognizant of potential RE price reduction  

    We only do buy and hold.  Am I against buying?  No!   if you find a property that meets your return goal with conservative under writing, then purchase. If the rates fall enough to justify a refinance, this purchase could be a great purchase but do not under write expecting a rate decrease. 

    I am being cautious and have high expectation on return (if return does not hit $1k/month I am disappointed so my expectation is lofty).  My last purchases were Dec 2021 (I purchased $4m of RE that month with good loan rates).  However I still look at my offerings from wholesalers, agents, etc and if one meets my criteria I would pursue it. 

    In summary, just like always if you find a RE that projects a return that satisfies your minimum expectation then pursue the purchase.  

    Good luck

    1Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    3y
    Quote from @Jason Thompson:

    With so much speculation about the market and its direction, are you waiting on the sidelines, ready to pounce, or are you still pushing forward with conservative underwriting regardless of what the market does? 


     this market is extremely good for ............ high end SF primary purchase.

    0Reply
  • Mark Berge
    Rental Property Investor · NJ · Member since 2020 · 60 posts · 16 votes
    3y

    For sfam high end purchase are you able to get rents that will pay back the piti and positive cash flow?

    0Reply
  • Mwazomela ThurmondBusiness Member
    Realtor · Newport News, VA · Member since 2022 · 32 posts · 26 votes
    3y

    @Jason Thompson Waiting can easily become analysis paralysis or analytical procrastinating. The deal that might be perfect for you could be on or off the market, but if you aren't ready you won't have enough time to be ready, willing, and able.

    Abraham Lincoln said if you ask him to cut a tree down in 6 hours, he's spending 4 hours sharpening his tool. Find a good lender if you need financing, a good real estate professional, and build your network. Interest rates are always changing, if that's a main concern speak with a mortgage broker or multiple lenders because they have knowledge and tools you can't find while reading an article online.

    1Reply
  • Michael Gansberg
    Investor · New York City, NY · Member since 2015 · 388 posts · 563 votes
    3y

    I use my inner barometer(thermometer?) The scarier it is to buy, the more likely that buying is the right thing to do. When you feel absolutely comfortable with buying("hey, what could go wrong, it's real estate!") then maybe the market's a bit toppy. However, I agree with the general sentiment on this thread. Buy consistently, manage well, and in the long run, the vagaries of the market will be irrelevant and you'll be happy that you bought. That's what my 20 years worth of experience has shown me, anyway.

    2Reply
  • Nick Robinson
    Rental Property Investor · Murrieta, CA · Member since 2020 · 338 posts · 344 votes
    3y

    @Jason Thompson
    I am waiting and building my position for a future purchase. Like many have said if the numbers work out than I do not see an issue with buying a deal. If you are buying, I would run your numbers extremely conservative, and it has to be CF+. Be careful with some BP advice of buying things that do not CF and you can always refinance later. RE is location specific but the national median sales price has fallen 11% from June. If you bought a home in June even if interest rates fall you cannot refi because you would have under what the requirements are to refi. I believe the last report is 19 of 50 largest metros have negative YoY appreciation right now. If you are smart and bought for CF the value of the asset is not as important but if you are buying for appreciation you may run into trouble. 

    I do not think most people think through what the FED cutting rates actually means. The Bond and Euro$ futures curves show a very high probability that the FED will not only cut FED funds but will do it sooner rather than later. When the FED cuts rates it will be a dramatic drop. I obviously agree with the bond market, which has a 100% track record. When the Fed cuts remember they are reactive which means the economy is going to be in bad shape. If you think this is a "soft-landing" or the beginning of a new bull market, why would the FED cut rates?

    The first sign of trouble in UST which was the 10/2 spread in March historically predicts a recession in the next 6-24 months with 16months being the avg. That would put us in July/second half of 2023. Considering yields have become more inverted and economic data continues to worsen I see no reason to doubt the curve. 

    2Reply
  • Jason Thompson
    OP
    Wholesaler · usa · Member since 2021 · 222 posts · 67 votes
    3y
    Quote from @John Morgan:

    I’ve bought 5 properties in the last 7 months. It’s all about “time in the market, not timing the market.” If it cash flows, then I’m interested. I don’t buy for appreciation. That will happen over time. As well as market rent. So I’m ok buying now, then holding for decades and letting my tenants pay off my properties.

     @John Morgan You're absolutely right, my friend; you have been scaling quickly over the last few months, and you must have some strong systems in place! Would you mind sharing one tip on how to scale at the rate you're currently going? I hope you're having a great weekend John. 

    0Reply
  • Jason Thompson
    OP
    Wholesaler · usa · Member since 2021 · 222 posts · 67 votes
    3y
    Quote from @Karl B.:

    I'm making offers, as I always have. I'm currently under contract on a commercial property that was priced stupid low and am also making offers on SF and MF. 

    In my market SF/MF inventory still isn't high and so properties are still selling pretty well - multiple offers and prices really haven't dropped. 

     @Karl B. Sounds like you have significant momentum, Karl. I am focused primarily on MF. What's the asset class you're looking at regarding MF?

    0Reply
  • Jason Thompson
    OP
    Wholesaler · usa · Member since 2021 · 222 posts · 67 votes
    3y
    Quote from @Dan H.:

    In many markets the prices have not declined enough to compensate for the rate increases for financed purchases.  From below 3% to 6.5% results in ~50% increase to the mortgage payment.  The effect of this is that for buy and hold, it is harder to find properties that provide a return that is better than more passive returns.

    Note interest rates are less critical for short holds such as for a flip, but flippers have to be cognizant of potential RE price reduction  

    We only do buy and hold.  Am I against buying?  No!   if you find a property that meets your return goal with conservative under writing, then purchase. If the rates fall enough to justify a refinance, this purchase could be a great purchase but do not under write expecting a rate decrease. 

    I am being cautious and have high expectation on return (if return does not hit $1k/month I am disappointed so my expectation is lofty).  My last purchases were Dec 2021 (I purchased $4m of RE that month with good loan rates).  However I still look at my offerings from wholesalers, agents, etc and if one meets my criteria I would pursue it. 

    In summary, just like always if you find a RE that projects a return that satisfies your minimum expectation then pursue the purchase.  

    Good luck

     @Dan H. sounds like a very systematic approach. Dan. Very wise to take the emotion out of the deal and pursue the numbers that make sense. I appreciate your post. Thank you, I hope you have a great weekend, Dan. 

    0Reply
  • Jason Thompson
    OP
    Wholesaler · usa · Member since 2021 · 222 posts · 67 votes
    3y
    Quote from @Carlos Ptriawan:
    Quote from @Jason Thompson:

    With so much speculation about the market and its direction, are you waiting on the sidelines, ready to pounce, or are you still pushing forward with conservative underwriting regardless of what the market does? 


     this market is extremely good for ............ high end SF primary purchase.

     @Carlos Ptriawan Can you tell me more about why High-end SF primary purchase is an excellent choice to invest in right now?

    0Reply
  • Jason Thompson
    OP
    Wholesaler · usa · Member since 2021 · 222 posts · 67 votes
    3y
    Quote from @Mark Berge:

    For sfam high end purchase are you able to get rents that will pay back the piti and positive cash flow?

     @Mark Berge This is my concern as well. If the market goes down and people start losing their jobs, the higher class will fall to the middle class, thus leaving a high-end SF vacant, requiring a rent drop and hurting cash flow and reserves. 

    0Reply
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