1st time buyer, buy now or wait?

Question

1st time buyer in Buffalo NY. Houses have been selling for 10k to 20k over asking price. I have to move into the property so it wont cash flow the  first year, but running the numbers it should cash flow $420 a month with the rent that it gets right now, when I move out. The triplex is all updated selling for 200k, I will need 10k down. My goals are to buy and hold rental properties. I manage one now that I don’t own so not to concerned with repairs. With all the uncertainty in the world do I wait another year to invest?

Marcus Auerbach · Answer

Don't wait. You'll never get that year back, even if the deal is so bad that you only break even (for now) it's worth to break the ice.

The point of the first deal is to do it. You'll make more money later. But most likely real estate will cost more a year from now.

Ryan Greene · Answer

@Matthew Irish-Jones

Thanks for the feedback everyone!! Like I said I’m new to RE so I really appreciate the advice.

It seems here in buffalo we have a lot of old 3/3 duplex’s over 2,000 sq ft that are mostly renovated, good mechanics, they go for around 180k-220k. Some of them were about 70-100k just 2 years ago. I’m assuming some flippers bought them in rough shape and did some renovations? Like you guys said no one can predict the future, but I think these homes will be more expensive in the coming years. @Matthew Irish-Jones do you think we’ll see these duplex’s increase in value to the 300-400k range? Or am i being to optimistic? Depending on location and conditions obviously. It seems to me that 3/3 duplexes 2,000-2,600 sq ft fully renovated in other smaller cities similar to buffalo are at least 300k?

Matthew Irish-Jones · Answer

@Ryan Greene there are still deals out there.  They are just harder to find.  If you are waiting to time the market, good luck.  Nobody knows where this thing is headed.  You could have places selling for double next year and you will be kicking yourself. Or you could wait one month and get them for pennies on the dollar and you will be a genius.  If the cash flow is there, and the asset is in good shape, and you have an accurate pro forma... pull the trigger.

Mack Benson · Answer

@Ryan Greene, if you are waiting until next year to go for your first deal you will always be waiting until next year. Unfortunately we don't know if we've hit the bottom or the top until it's well in the rear view mirror. As long as you are underwriting conservatively and not forcing deals to work out on paper you should be okay.

In today's environment you may want to stress test the deal to see how bad things can get before you break even just to make sure you are conservative enough in your estimates. If you typically underwrite to a 5% vacancy, how does the deal look at 10%? If it look good with the in place property taxes, how does it look if there's a 25%, or 50% increase because the city/county/state are running a deficit and need to raise funds in 2 years? Those are just some things to think about while stress testing.

I'll end with a quote attributed to Abraham Lincoln, "Things may come to those who wait, but only the things left by those who hustle."

Jason Amos · Answer

@Ryan Greene I disagree.

I think the market has become wayyy too "frothy" in Buffalo. These houses are priced at the TOP of what they will appraise for. There's no room to do anything but hold and keep a section 8 tenant in them. They have been held by folks who did nothing to the property for years and now complicit realtors have encouraged them to price their properties at these "peak values.

I'm looking too, but anything I get won't be on the MLS. I will contact owners directly of stuff I see with high grass and/or boards on the windows.

Sean Howell · Answer

Agree with everybody else here. I had a friend whom I worked with. She was also a part time realtor on the side. I told her I wanted to get into investing and she mentioned to me that she wanted to as well but wanted to wait for the crash to happen and prices to drop a bit. She constantly tried to warn me to wait. I ignored her and jumped in with both feet.2 years and 5 deals later for me, she is still on the sidelines waiting. The thing about it too is that, when this "crash" finally does come, will she even have the experience and knowledge to fully capitalize on it?

Calvin Ozanick · Answer

I would suggest jumping in. Most people use house-hacking to limit their housing costs. Very rarely are you going to purchase a house hack that pays for expenses, reserves and cash flows anything significant on top of it. Mortgage rates are at an all time low for an owner occupied unit and I doubt we will see these rates for a very long time. My suggestion is to jump into something you can afford and get a year head start.

Mike McCarthy · Answer

Agreed with the others. People have been predicting a crash just around the corner for the past 8-10 years. As long as it’s a decent deal (it sounds like it is), go for it! No one knows what the world will look like next year, so don’t invest like you do.

Also, if consider it cash-flowing when you’re living in one of the units. That’s $$/mo that you’re in effect paying yourself rent. That counts for something!

John W. · Answer

On this site, it's a little like asking the barber if you need a haircut. But I would take your time and only buy something if it really makes sense. It's a sellers market now but by next year I wouldn't be surprised if there are foreclosures all around. Stuff is selling for more than it's worth and that's why I'm selling some of my doubless now to purchase land. Land is becoming more and more valuable as people are seeing the negatives in urban environments.

Tim Rostro · Answer

I was commenting on another thread by someone who just purchased a duplex in Buffalo for 96k.  Four years ago, I was looking at properties in Cleveland and Buffalo.  I bought a duplex in Euclid, OH just northeast of Cleveland but, was impressed with the future of Buffalo.  I wanted to buy another property immediately in Buffalo but ended up waiting.  Then, prices went up in both areas.  Duplexes/triplexes that were selling for 60k-70k were selling for 80k-100k.

Don't wait.  If you can afford it and the numbers work, buy it.  The appreciation will follow.

1st time buyer, buy now or wait?

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