Should I wait to invest

Question

I am scheduled to close next on my first property.  It has good cash flow but with the state of the country I'm wondering should we walk away? There are talks of recession and worries about tenants not making rent. Not to mention the basic fear behind my first property. Not sure what to do and would love some feedback.  To buy or not to buy? What would you do?

Alex Olson · Answer

@Jade N. No one knows. Best comparison is 9/11. Short blip and then back in business. People will need a place to live. Government assistance programs will be available. Planning for some vacancy is normal. Bump that up a bit and you will be fine. Assuming that your modeling is good.

Nathan Gesner · Answer

I live in a small community that is heavily reliant on tourism and oil. Our outlook doesn't look too rosy right now, but I just put a house under contract today.

Every market is a good market for buying IF you buy smart. Buy something that works well today and can work well tomorrow if the market drops. If you play the game of holding on to your money and waiting for the "perfect" moment, it may pass you by.

Shawn Ackerman · Answer

@Jade N. Glad you didn't pull the plug...So easy to let what's happening now effect your start.  I would however, If you have not yet closed, attempt to get a reduction, concession or something from the seller.  Now if you are already getting a killer deal then your good.  Now is the opportunity to renegotiate.  All the best!!  Always remember to persist and you will WIN!!!

Anthony Simboli · Answer

@Jade N. congrats on moving forward. I'm going to have to agree with @Alex Olson here in that no one knows what is going to happen. My best advice for any future investments is to always plan for the worst. Have contingency plans for all your investments. Think about enter/exit strategies and add in your risk tolerance. You can make a poor investment in a "great" economy just as easily could make a great investment in a "poor" economy.

Jade N. · Answer

Thanks @Alex Olson. I decided to move forward. I'm sure I'll learn a ton during these times!

Blake Harris · Answer

What I meant by market rent was more so, are there similar properties actually filling a vacancy at the price you are planning on charging as of the last month? Yeah, in theory, market rent may not have changed... but those prices are artificial. People are going to try and cut back with everything that is going on in the world. Your rents are only worth what a tenant is willing to pay. If you are able to stay at your original asking rent more power to you, but getting 100$ in cash flow starting this week for the next year is going to beat getting 200$ of cash flow start 2 months from now. Over two months, at a theoretical $700 mortgage payment, you have to pay your self back for the first 7 months of having a tenant to clear the $1400 you paid towards the vacancy, meaning you would make half the money in cash flow over the next year as you would lower your rent price to fill it faster.

Jade N. · Answer

@Blake Harris I am not sure I understand your question completely. To my knowledge the market rent has not changed during the pandemic. So yes, it still cash flows. Majority of the rent is subsidized so expenses are covered.

@Shawn Ackerman Deal was done prior to the major impact of COVID but I think its still a good deal. Thanks!

@Anthony Simboli Wise advice. Definitely went back and forth on pros vs cons and strategies for potential scenarios. Will continue to do so as things develop. Thank you!

@Marlen Weber Thank you!

Blake Harris · Answer

@Jade N.

You said the property cash flows but is that based on the calculations before this pandemic started, or did you run your current rental market numbers based on the current state of the market? People always need a place to live and interest rates are favorable right now, so I say if the numbers have a cushion to be competitive in this current market you should go for it. Also, as the saying goes "time in the market beats timing the market".

Caleb Heimsoth · Answer

@Jade N. I wouldn’t be buying rental property right now. I just don’t see the reasoning behind that

Marlen Weber · Answer

@Jade N. congratulations on moving forward and investing on your first deal.

Should I wait to invest

Most Popular Reply