Rental Property Investor · Titusville, FL · Member since 2019 · 10 posts · 3 votes
I have 75k saved and ready to purchase my first rental property. Prices in my area are high but interest rates are low . Should I wait or start looking to buy now?
Please don't buy now. The downturn is going to clobber us all. Just sit on the sidelines and do nothing while waiting for it to come.
Meanwhile, I'll be.... um... sitting out with you. That's right. I certainly won't be buying any houses below market value and making a killing while my competition sits on the sidelines. ;-)
Okay, I've had my fun. You don't know when the next downturn is coming. Neither do I. Here is a list of all the things neither of us knows:
1) When it will start
2) To what extent prices will drop
3) How long it will last
You could sit on your hands for an entire market cycle doing nothing except worrying that you aren't at the "lowest" possible price. That's trying to time the market, and it is impossible. No one can do it consistently, and most people can't even get it right one time. Check out the movie/book "The Big Short" and you'll see that out of 1 million or so financial "experts" in 2007-2009, only a handful of people got it right, and even then a few of them almost lost their shirts by diving in too soon.
Bottom line: get out there and learn your market. If you can get good cash flow, you'll be able to survive even if values dip 10%,20%,30%. Cash flow helps you weather the storms. Be sure to have reserves built up. Don't spend your last $ buying a place that has you "feeding it" $500/month out of your own pocket today while the market is still hot.
You are in an area of high demand and short supply. As long as you see a sustained mismatch between demand and supply, you may have a great opportunity, even in a downturn. An economic downturn doesn't affect all areas.
Hey Victor is right. I would find a good deal, secure the low interest loan, and possibly refinance. Then you’ll have some cash and prepared to do the next deal. if you want to wait at that point for downturn then you can.
Hey just remember when securing that first loan, often times the appraisal comes back at suspiciously close to the asking price or agreed-upon price. On the refinance you may, although nothing is certain, get 75-80% of a higher appraised value. That means you want to make sure that you buy market so that after any rehab, you’ll be able to refinance and get all or most of your cash back.
@Jesse Spaur same rule applies at every stage of the economic cycle...buy under the current market value and add additional value where you can. if you can hit both of those notes your risk is lowered and you may just come out on top.
I have 75k saved and ready to purchase my first rental property. Prices in my area are high but interest rates are low . Should I wait or start looking to buy now?
Your comment:
Wait for downturn in market or purchase first rental now?
This is a hard decision for a new investor such as you and I. I find myself getting stuff in analysis paralysis waiting for the perfect opportunity to jump in, but as time has gone on it is clear there is never a perfect time. By jumping in now with no sign of the market turning down you can do nothing but win. Even if you loose a little money because of the experienced gained for the next many deals.
@Jesse Spaur people will always need a place to live in any cycle so as long as you are not banking on appreciation or rent increases to make the deal work and it stands on its own your good. Make sure to lock in long term debt and can withstand a rent cut if need be.
Please don't buy now. The downturn is going to clobber us all. Just sit on the sidelines and do nothing while waiting for it to come.
Meanwhile, I'll be.... um... sitting out with you. That's right. I certainly won't be buying any houses below market value and making a killing while my competition sits on the sidelines. ;-)
Okay, I've had my fun. You don't know when the next downturn is coming. Neither do I. Here is a list of all the things neither of us knows:
1) When it will start
2) To what extent prices will drop
3) How long it will last
You could sit on your hands for an entire market cycle doing nothing except worrying that you aren't at the "lowest" possible price. That's trying to time the market, and it is impossible. No one can do it consistently, and most people can't even get it right one time. Check out the movie/book "The Big Short" and you'll see that out of 1 million or so financial "experts" in 2007-2009, only a handful of people got it right, and even then a few of them almost lost their shirts by diving in too soon.
Bottom line: get out there and learn your market. If you can get good cash flow, you'll be able to survive even if values dip 10%,20%,30%. Cash flow helps you weather the storms. Be sure to have reserves built up. Don't spend your last $ buying a place that has you "feeding it" $500/month out of your own pocket today while the market is still hot.
@Jesse Spaur no need to wait. Anytime is a good time to buy real estate. You just have to be more conservative and smarter with your projections in this type of market we're in. Don't hop on the first deal you see. Be vigilant and diligent in your search. You may have to evaluate 100 deals to find one. Be patient and the right deal will come along. When it does, be ready to move. Good luck
We are not to far from you in Tampa. Feel free to connect and reach out.
@Jesse Spaur if you don't purchase a cash flowing asset today you are missing out on a return and not having a return on your money means you'll never grow your money. Get started investing right away by buying great assets that cash flow every month (50+ unit apartment communities).
@Danny Randazzo and @Tj Hines have it right, get started right now. That's not the same as "go buy anything and everything." Buy cash flowing deals that can survive a downturn!
Agreed on apartments as well. Multifamily has many advantages over SFR.
Everyone thought I was crazy when I finally jumped in five years ago. They said we were in a bubble and things were about to crash. Then I bought four more SFRs in 2017. Same thing. We were in a bubble and I should wait until it pops. Well, real estate is still doing ok and the economy is on fire with the lowest unemployment rate in 50 years. I grabbed two more SFR properties this year. I would jump in now if I were you. Good luck!
Have you tried to be a passive investor? That means you lend the funds to a multifamily investor.You become partner in the deal.It's the easiest way to jump into the business , earn and and learn.
Hey @Jesse Spaur although you might be able to buy low in these times, I would suggest considering investing asap. There will always be a reason to hold off on investing and I believe that the sooner someone can start investing the better, in most cases! Great question, I enjoyed reading some of these other responses! Let me know if you have any other questions!
I bought at the top of market right before the downturn...in 2015...and it all worked out...
We could very well have a downturn as soon as you sign. So long as you buy well and you’re cash flowing (and didn’t intend to sell the next day), you’ll be fine.
I have friends from 30 years ago still waiting for a deal because REI has to crash sometime.
They took forced retirement & work at places like HD/Lowes (to make ends meet), watching us fools buy $70-$80k a year in materials etc as we humbly build/rehab our modest portfolio's.
@Jesse Spaur in spite of believing an economic downturn is imminent, I purchased my first this year. Only because it would cash flow immediately and I was able to parcel off some land from it and act as the bank on that which put my buy in at a much lower amount.
Anyway, if it's a great deal now, it's an even better deal in a downturn.
My simple answer is.. Ask yourself the question of whether or not you are a speculator or an investor.... trying to time the market and waiting for the bottom, would be speculation. You probably will never catch the market exactly at the bottom or the top. If you are an investor, you're not trying to time the market you're investing in it because it cash flows and will appreciate in time.
@Jesse Spaur If you wait, you could be waiting for a long time. No one truly knows how long this cycle will last. You do need to educate yourself and understand the risks and rewards of this industry and be patient enough to buy right. Be conservative and stick to your criteria, there is never a perfect time to buy.