Is it worth it to enter the real estate game at this time.

[Josh Dickson]

I've always been interested in real estate but I never had the capital to even think about it until recently. Some of the information I've read seems to indicate that the market is very competitive at this moment. Also, interest rates are higher than they have been for the last decade or so. My primary intention is to slowly accumulate rental properties to supplement my income and maybe, some day, be able to retire early. I've started educating myself but I wanted to ask people who have actually taken action and gotten into it, is it worth it at this time?

[Dave Skow]

@Josh Dickson- thanks - if you have the capital now and the interest - it  doesnt  hurt to  start looking for a property that  can  cash flow and / or appreciate  and buy a rental ....if you decide to  move  forward - make sure  you have your financing lined up  and  get pre approved if you need a loan

[Henry Clark]

If this LSU guy gets on.  You should do a deal next week. 

[Henry Clark]

Forget all the wisdom today.  Lady Luck says next week so a deal. 

[Marcus Auerbach]

Always be buying, better to have time in the market than to time the market. Just getting in the game is worth it. Advice about buying equity, cash flow, stick to your numbersetc are very one dimensional and typically lead to frustration and giving up. 

Don't go on a unicorn hunt. Buy the best deal the market offers you, which means you have to first find out what this means in your market at the moment. People who are waiting for the right time to get started, never get started.

[Peter Dorinsky]

You can anticipate competition most of the time when you're looking to buy an investment property. If you're looking to buy your first investment it may just require some extra patience and creativity (I'd suggest dabbling in off-market deals in your area of interest). It's easy to get analysis paralysis, but like Marcus said, find the best deals the market has to offer.

[Konstantin Ginzburg]

The market has gotten more competitive over the last few years and interest rates have made it more difficult to find a property that will cash flow, day 1 but it is still possible to achieve success in real estate in the current market. You may spend more time sorting through many deals before you find one that will meet your needs but the properties are still there. Its been said here but the best time to enter the market was years ago, the second best time is now. Real estate is a long term strategy but most of the time, real estate does offer a great return on investment given a large enough time frame. Just continue with networking, educating, and identifying your exact investment strategy and once you feel comfortable, make your move. 

[Dan Heuschele]

Quote from @Ray Hage:

Quote from @Dan Heuschele:

Quote from @Greg Scott:
Honestly, the best time to start investing in real estate was 20 years ago.  
The second best time is NOW.
(This saying has been true for decades, every single year.)

 Do you think it was true in 2006?  Definitely not true every single year.  If you purchased in 2006, you would have been far better off purchasing in 2010.  Some markets lost 40% of value and many markets lost 20% of value.  

Purchasing most properties today would result in negative cash flow at high LTV. There is a reason many syndicators and other RE investors are sitting on the sideline. Does this mean that there are no properties that are good investments? No, but they are a small minority of residential properties. Underwriting should be conservative. If conservative underwriting shows that the return warrants the effort of residential RE, that is a good find in this market.

Good luck

If you bought a cashflowing investment property in 2006, sure it would have sucked to lose half the value by 2008-2009. However, you'd still be making money on your investment and you may have the ability to negotiate with the bank on that crash to lower your mortgage vs just default. Even if you kept the same mortgage and hold long enough, you are almost guaranteed to win in terms of appreciation...And cashflowed for all those years

There are exceptions, of course. Say you bought a property in 1950 Detroit. By the 1970s, the city had gone severely downhill. Another example is if you buy in a one-company town and that company moves or goes out of business. I am still looking at properties today even with high prices and rates. There is not a lot of good stuff out there so I will be patient.

 >If you bought a cashflowing investment property in 2006, sure it would have sucked to lose half the value by 2008-2009. However, you'd still be making money on your investment

You would not necessarily be making money on your investment property.  Many markets experienced increased vacancy and reduced rents.  Cash flowing today does not necessarily imply cash flowing next year.

If there was no reduction in cash flow, you would not have seen as many RE investors selling as there was.  Sure, it sucks to be upside down in the property after it depreciated 20% to 50% (some places even more) but if the cash flow was still there the investor could still make the payments.  Many locations the cash flow turned negative, the investor lost their W2 income, and they were upside down in their investment (owed more than the property was worth).

There are many syndicators and experienced RE investors sitting the sidelines at this time.  These are some of the more successful RE investors.

I am not stating there are no RE acquisitions worth pursuing.  I am indicating that it is prudent to do conservative underwriting and to evaluate RE investments against other investment options.  If I can get over 5% on a safe CD, what sort of return do I need to justify the effort of residential RE?

The last RE I purchased was in Dec 2021.  I purchased $4M that month (2 residential MF properties) financed 30 years at just a bit over 3%.  My underwriting projected poor cash flow even at that interest rate (but I was purchasing under market value (appraisals came in $400K above purchase) and one had significant value add and the other a minor value add).  At today's rate, I would pass on these even though I did quite well.  I would pass on these purchases today because it would have to be a flip as the cash flow would be large negative that would consume my value add.

In Dec 2021 I did not find it easy to find RE that met my criteria for return.  It is more difficult today due to the doubling in rates.

Good luck

[AJ Wong]

Definitely more to lose by not investing. Dollars and savings are losing value. All about finding a great deal! No time like the present. 

[Michael Newman]

Quote from @Josh Dickson:

I've always been interested in real estate but I never had the capital to even think about it until recently. Some of the information I've read seems to indicate that the market is very competitive at this moment. Also, interest rates are higher than they have been for the last decade or so. My primary intention is to slowly accumulate rental properties to supplement my income and maybe, some day, be able to retire early. I've started educating myself but I wanted to ask people who have actually taken action and gotten into it, is it worth it at this time?

Its seems like there is always "something" on the horizon to make us uncertain, but at some point we have to take action. This isn't isolated to RE either, and there is always something "bad" about to happen. In 2020 everyone was doom and gloom when I would mention anything related to the sock market, but that ended up being one of my best years even with the pandemic and lockdowns. 

Start analyzing properties in an area that interests you. Let the numbers tell you if its a good deal, and avoid letting the talking head on TV, or elsewhere, sway your plans. If things go south and get bad, then look at it as tuition to the learning process. I think the saying is "Hope for the best, but plan for the worst". If you apply that and start slowly accumulating properties I think you will do just fine. Its your goals and plans that determine where you go in life. 

[Ray Hage]

Quote from @Dan Heuschele:

Quote from @Ray Hage:

Quote from @Dan Heuschele:

Quote from @Greg Scott:
Honestly, the best time to start investing in real estate was 20 years ago.  
The second best time is NOW.
(This saying has been true for decades, every single year.)

 Do you think it was true in 2006?  Definitely not true every single year.  If you purchased in 2006, you would have been far better off purchasing in 2010.  Some markets lost 40% of value and many markets lost 20% of value.  

Purchasing most properties today would result in negative cash flow at high LTV. There is a reason many syndicators and other RE investors are sitting on the sideline. Does this mean that there are no properties that are good investments? No, but they are a small minority of residential properties. Underwriting should be conservative. If conservative underwriting shows that the return warrants the effort of residential RE, that is a good find in this market.

Good luck

If you bought a cashflowing investment property in 2006, sure it would have sucked to lose half the value by 2008-2009. However, you'd still be making money on your investment and you may have the ability to negotiate with the bank on that crash to lower your mortgage vs just default. Even if you kept the same mortgage and hold long enough, you are almost guaranteed to win in terms of appreciation...And cashflowed for all those years

There are exceptions, of course. Say you bought a property in 1950 Detroit. By the 1970s, the city had gone severely downhill. Another example is if you buy in a one-company town and that company moves or goes out of business. I am still looking at properties today even with high prices and rates. There is not a lot of good stuff out there so I will be patient.

 >If you bought a cashflowing investment property in 2006, sure it would have sucked to lose half the value by 2008-2009. However, you'd still be making money on your investment

You would not necessarily be making money on your investment property.  Many markets experienced increased vacancy and reduced rents.  Cash flowing today does not necessarily imply cash flowing next year.

If there was no reduction in cash flow, you would not have seen as many RE investors selling as there was.  Sure, it sucks to be upside down in the property after it depreciated 20% to 50% (some places even more) but if the cash flow was still there the investor could still make the payments.  Many locations the cash flow turned negative, the investor lost their W2 income, and they were upside down in their investment (owed more than the property was worth).

There are many syndicators and experienced RE investors sitting the sidelines at this time.  These are some of the more successful RE investors.

I am not stating there are no RE acquisitions worth pursuing.  I am indicating that it is prudent to do conservative underwriting and to evaluate RE investments against other investment options.  If I can get over 5% on a safe CD, what sort of return do I need to justify the effort of residential RE?

The last RE I purchased was in Dec 2021.  I purchased $4M that month (2 residential MF properties) financed 30 years at just a bit over 3%.  My underwriting projected poor cash flow even at that interest rate (but I was purchasing under market value (appraisals came in $400K above purchase) and one had significant value add and the other a minor value add).  At today's rate, I would pass on these even though I did quite well.  I would pass on these purchases today because it would have to be a flip as the cash flow would be large negative that would consume my value add.

In Dec 2021 I did not find it easy to find RE that met my criteria for return.  It is more difficult today due to the doubling in rates.

Good luck

Well, you are correct, there is no guarantee you'd be making money or cashflowing on your investment but you could say that any point in time. A tenant can trash your place and then you lose 2-3 months of rent during the renovations and that might be enough to screw up a whole year. That being said, 2009 was an especially tough time for many investors and renters. 

I agree that you need to be putting your money into intelligent investment options whether it is a CD, stock or RE. 5% on a CD is great, but even if you got the same return on RE, you'd be better off. However, I know at the moment many markets don't cashflow positively, even with 25% down! 

Congrats on that Dec '21 purchase! You picked it out well. I have seen some decent deals but it is hard to get them as the competition is fierce when there is a good deal now at least in my south Florida market. Times are tough right now for those on the hunt. I would hate to be just starting out but the ones that find success today are going to find much more in the future as I think for many markets prices will go down significantly. If I see something exceptionally good today with high interest rates, I'll be pushing on it. We can't just be worried about another 2009-level crash or no one would buy anything. 

[Mohammed Rahman]

Hey @Josh Dickson - if you're going to try timing the market, you should stay out of it. 

Like most things in life, you can't time it unless you look back at things and say "oh I should have done this at this point in time"

Anyone that tells you now is a good or bad time to "enter real estate" is misleading. There's only the right time for you. 

If you feel your finances are in a position and you're getting the return that you want, then god speed! 

[Dan Heuschele]

Quote from @Ray Hage:

Quote from @Dan Heuschele:

Quote from @Ray Hage:

Quote from @Dan Heuschele:

Quote from @Greg Scott:
Honestly, the best time to start investing in real estate was 20 years ago.  
The second best time is NOW.
(This saying has been true for decades, every single year.)

 Do you think it was true in 2006?  Definitely not true every single year.  If you purchased in 2006, you would have been far better off purchasing in 2010.  Some markets lost 40% of value and many markets lost 20% of value.  

Purchasing most properties today would result in negative cash flow at high LTV. There is a reason many syndicators and other RE investors are sitting on the sideline. Does this mean that there are no properties that are good investments? No, but they are a small minority of residential properties. Underwriting should be conservative. If conservative underwriting shows that the return warrants the effort of residential RE, that is a good find in this market.

Good luck

If you bought a cashflowing investment property in 2006, sure it would have sucked to lose half the value by 2008-2009. However, you'd still be making money on your investment and you may have the ability to negotiate with the bank on that crash to lower your mortgage vs just default. Even if you kept the same mortgage and hold long enough, you are almost guaranteed to win in terms of appreciation...And cashflowed for all those years

There are exceptions, of course. Say you bought a property in 1950 Detroit. By the 1970s, the city had gone severely downhill. Another example is if you buy in a one-company town and that company moves or goes out of business. I am still looking at properties today even with high prices and rates. There is not a lot of good stuff out there so I will be patient.

 >If you bought a cashflowing investment property in 2006, sure it would have sucked to lose half the value by 2008-2009. However, you'd still be making money on your investment

You would not necessarily be making money on your investment property.  Many markets experienced increased vacancy and reduced rents.  Cash flowing today does not necessarily imply cash flowing next year.

If there was no reduction in cash flow, you would not have seen as many RE investors selling as there was.  Sure, it sucks to be upside down in the property after it depreciated 20% to 50% (some places even more) but if the cash flow was still there the investor could still make the payments.  Many locations the cash flow turned negative, the investor lost their W2 income, and they were upside down in their investment (owed more than the property was worth).

There are many syndicators and experienced RE investors sitting the sidelines at this time.  These are some of the more successful RE investors.

I am not stating there are no RE acquisitions worth pursuing.  I am indicating that it is prudent to do conservative underwriting and to evaluate RE investments against other investment options.  If I can get over 5% on a safe CD, what sort of return do I need to justify the effort of residential RE?

The last RE I purchased was in Dec 2021.  I purchased $4M that month (2 residential MF properties) financed 30 years at just a bit over 3%.  My underwriting projected poor cash flow even at that interest rate (but I was purchasing under market value (appraisals came in $400K above purchase) and one had significant value add and the other a minor value add).  At today's rate, I would pass on these even though I did quite well.  I would pass on these purchases today because it would have to be a flip as the cash flow would be large negative that would consume my value add.

In Dec 2021 I did not find it easy to find RE that met my criteria for return.  It is more difficult today due to the doubling in rates.

Good luck

Well, you are correct, there is no guarantee you'd be making money or cashflowing on your investment but you could say that any point in time. A tenant can trash your place and then you lose 2-3 months of rent during the renovations and that might be enough to screw up a whole year. That being said, 2009 was an especially tough time for many investors and renters. 

I agree that you need to be putting your money into intelligent investment options whether it is a CD, stock or RE. 5% on a CD is great, but even if you got the same return on RE, you'd be better off. However, I know at the moment many markets don't cashflow positively, even with 25% down! 

Congrats on that Dec '21 purchase! You picked it out well. I have seen some decent deals but it is hard to get them as the competition is fierce when there is a good deal now at least in my south Florida market. Times are tough right now for those on the hunt. I would hate to be just starting out but the ones that find success today are going to find much more in the future as I think for many markets prices will go down significantly. If I see something exceptionally good today with high interest rates, I'll be pushing on it. We can't just be worried about another 2009-level crash or no one would buy anything. 

> 5% on a CD is great, but even if you got the same return on RE, you'd be better off.

If I can get over 5% return on something as safe and as passive as a CD, there is no way I consider residential RE without a projected return far over double the CD.  RE has higher risk and residential RE is not passive (even with the use of a PM). 

Maybe I am spoiled in my RE expectations.  In this market (with the other investment options available), my conservative underwriting should show over 20% return for me to have some interest in a residential RE acquisition.  I have consistently achieved far better than this in the past decade which is why I am currently not purchasing (I have made one offer in the last 1.5 years). 

If you want to perform the effort of residential RE for similar return as a CD that is your choice.  I prefer far greater return for dealing with residential RE.  

[John Morgan]

@Josh Dickson

I’ve bought 6 rentals in the last year. I’ll keep buying. Dollar cost average your buys over years/decades and you’ll be set for life. Time in the market, not timing the market is key.

[Adam Bartomeo]

Its always a good time to buy! Never let the market trends stop you. Look at the Newspaper Headlines in the 80's, "Worst Time To Buy", "Worst Market Ever"... If you bought a house then your ROI would be about 2,000% today. All you have to do is hold.

[Robert Collins]

Hey Josh,

Congratulations on your newfound opportunity to explore real estate investing! I understand your concerns about the competitive market and the current interest rate environment. However, let me assure you that it can still be worth entering the real estate game at this time. Here's why:

1. Long-Term Investment Perspective: Real estate is a long-term investment, and market fluctuations are a part of any investment landscape. While the market may be competitive now, it's important to remember that real estate values tend to appreciate over time. By starting your journey now, you can begin building equity and positioning yourself for future growth.
2. Income Generation Potential: Your goal of accumulating rental properties to supplement your income aligns well with real estate investing. Even in a competitive market, there is always a demand for rental properties. By carefully selecting properties in desirable locations and conducting thorough market research, you can find opportunities that generate steady rental income.
3. Adaptability and Flexibility: Real estate offers various investment strategies, allowing you to adapt to the current market conditions. For instance, you can consider alternative options like house hacking, where you live in one unit of a multi-unit property and rent out the rest. This approach can help offset the financial burden and make it easier to enter the market.
4. Financing Options and Interest Rates: While interest rates may be higher than in previous years, they are still relatively low compared to historical standards. This means that financing options are available, and you can secure loans at reasonable rates. As you accumulate rental properties, the rental income can help cover the mortgage expenses, making the investment financially viable.
5. Building Wealth and Early Retirement: Real estate has been a proven path to wealth creation and early retirement for many individuals. By slowly accumulating rental properties, you can leverage the power of real estate appreciation, rental income, and potential tax benefits to build a solid financial foundation for your retirement goals.

Remember, real estate investing requires careful research, due diligence, and a long-term mindset. Educating yourself and seeking advice from experienced investors is a wise approach. While the current market conditions may pose challenges, they also present opportunities for those who are willing to put in the effort and make informed decisions.

Ultimately, the decision to enter the real estate game is a personal one based on your goals, resources, and risk tolerance. If you are passionate about real estate, willing to learn, and ready to take action, now can be a worthwhile time to embark on your real estate investment journey.

Wishing you success in your real estate endeavors as you work towards supplementing your income and achieving your retirement goals!

[Andreas W.]

@Josh Dickson

It is much harder to make money in re now than it was 10 years ago. The run up in prices for purchase and rents will not get repeated. 10 years ago everybody could make money by buying run of the mill MLS listings. This is over. Now you need to be good in what you are doing. Plus you get 5% for your money in a bank. That is hard to beat for someone who enters the field now.

[Joe Hammel]

I started buying in 2019 and bought the entire time during the scary crazy fast appreciation of COVID. I have 20 doors that cash flow $100k/year in Metro Detroit. I have locked in mortgages and it's extremely unlikely rents will ever "significantly" decrease to the point to where they don't cash flow well.

Point being...everyone would have said that was a bad time to buy, 2020,2021,2022....but it's going pretty fine.

[Michael Smythe]

A deal is a deal, they just take longer to find now.