Is this good time to purchase first rental? (First time buyer)

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Is this good time to purchase first rental? (First time buyer)

Alex Xu
Charleston, SC · Member since 2020 · 13 posts · 2 votes

Hello guys! I'm looking to purchase my first rental property near Harrisburg, PA, sounds exciting, but I would love some guidance.

The good news are:

  • The interest rate is an all-time low; I can get pre-approval between 2.25-2.50% (15/30yrs loan)
  • The property I'm looking at being on the market since late June with only 2 offers.
  • I ran the number. It makes sense to me.

My concerns are:

  • Current laws do not allow eviction or foreclosures until December 31, 2020. But data shows the housing prices might drop 10-20% in Q1 or Q2. Just like the 2008 housing market crash
  • The unemployment rate is still at an all-time high.

My questions are:

  • I don't know if I should be more patient and wait until next year when the price drops and then buy when the property price drops.
  • Or maybe wait until foreclosure houses on the market next year and buy at a discounted price.
  • I am aware that every state/area is different, but some opinion and guidance would be beneficial!

Also, what websites do you use for data/facts on house inventory and price treat over the past few years?

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Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
5y

Welcome! I certainly understand your concerns, but waiting for some external event to occur is never a viable option. For instance- I have clients that didn't want to invest five years ago because interest rates were too high. Now they are waiting for prices to come down. There's always a reason to be fearful. 

There are lots of newbies who are worried about the eviction moratorium- it's true, there are people out there who are legitimately struggling right now, but if you screen properly and manage your tenants professionally, you can mitigate that risk. We manage approx 100 properties and only had one (normally very excellent) tenant struggling with unemployment and paying rent. Our general manager helped her apply for supplemental rental assistance and she was awarded funds and all is good. 

Jump in, act professionally and treat everyone along the way professionally and all of the pieces will fall in to place. 

Happy Investing!

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  • Beck Joyner
    Realtor · Harrisburg, PA · Member since 2017 · 43 posts · 43 votes
    5y

    I'd really be surprised that the prices will drop as predicted in Q1-Q2 next year.  What is different about this current market is the extreme and very intense inventory shortage brought on my a combination of years of drought plus the low interest rates.  In the area, most correctly priced properties (whether owner occupant and or investment) are getting gobbled up.  Had one property the other day that had 10 offers in 48 hours, for example.  Even the junkers that need a full top to bottom gut and getting snatched up.   I'm sure adding more inventory next year due to foreclosures will ease things a bit, but I don't think it's going to be the bargain basement that is being predicted.  I suggest if you have the opportunity now, buy now.  No need to be desperate and overpay for anything, of course. Just be persistent and methodical. 

    3Reply
  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    5y

    Welcome! I certainly understand your concerns, but waiting for some external event to occur is never a viable option. For instance- I have clients that didn't want to invest five years ago because interest rates were too high. Now they are waiting for prices to come down. There's always a reason to be fearful. 

    There are lots of newbies who are worried about the eviction moratorium- it's true, there are people out there who are legitimately struggling right now, but if you screen properly and manage your tenants professionally, you can mitigate that risk. We manage approx 100 properties and only had one (normally very excellent) tenant struggling with unemployment and paying rent. Our general manager helped her apply for supplemental rental assistance and she was awarded funds and all is good. 

    Jump in, act professionally and treat everyone along the way professionally and all of the pieces will fall in to place. 

    Happy Investing!

    3Reply
  • Jon KellyPro Member
    Investor · Bethlehem, PA · Member since 2016 · 929 posts · 951 votes
    5y

    @Alex Xu Can you buy one now and in 6-months? Imagine if your prediction about 10-20% price reductions, etc. are true AND you had 6+ months of experience and your first property under your belt. You'll be in a much better position. 

    What if your prediction isn't true and prices stay flat? Well, then you already own a property... 

    What if prices drop 10-20% but the competition is 5x of what it is now and you aren't able to get a deal? 

    Moral of the story is, run your numbers and if a deal hits your criteria then pursue it. It sounds like this property in Harrisburg meets your criteria, so make an offer! 

    0Reply
  • Alex Xu
    OP
    Charleston, SC · Member since 2020 · 13 posts · 2 votes
    5y

    Thank you for all of your comments. I agree that everyone's situation is different, timing the market is challenging; if the number works out and hold for the long term, it will work out. I have a follow-up question regarding lending.

    I just spoke to my lender, and he offers me 3.65% with 2points, which means I have to pay 2points on the loan amount to get 3.65% since rental.My loan is around $160K. Is this a reasonable rate?? and is this common for investment properties? Please advise! Thank you all.

    0Reply
  • Alex Xu
    OP
    Charleston, SC · Member since 2020 · 13 posts · 2 votes
    5y
    Originally posted by @Beck Joyner:

    I'd really be surprised that the prices will drop as predicted in Q1-Q2 next year.  What is different about this current market is the extreme and very intense inventory shortage brought on my a combination of years of drought plus the low interest rates.  In the area, most correctly priced properties (whether owner occupant and or investment) are getting gobbled up.  Had one property the other day that had 10 offers in 48 hours, for example.  Even the junkers that need a full top to bottom gut and getting snatched up.   I'm sure adding more inventory next year due to foreclosures will ease things a bit, but I don't think it's going to be the bargain basement that is being predicted.  I suggest if you have the opportunity now, buy now.  No need to be desperate and overpay for anything, of course. Just be persistent and methodical. 

    0Reply
  • Alex Xu
    OP
    Charleston, SC · Member since 2020 · 13 posts · 2 votes
    5y

    Thank you for your common! I agree that everyone's situation is different, timing the market is challenging; if the number works out and hold for the long term, it will work out. I have a follow-up question regarding lending.

    I just spoke to my lender, and he offers me 3.65% with 2points, which means I have to pay 2points on the loan amount to get 3.65% since rental.My loan is around $160K. Is this a reasonable rate?? and is this common for investment properties? Please advise! Thank you! 

    0Reply
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